MortgagesJun 29 2021

Fake EWS1 forms cause headache for borrowers

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Fake EWS1 forms cause headache for borrowers
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Mortgage applicants and leaseholders are still being held back by external wall application (EWS1) forms, a document designed to verify whether a building is safe or not following the Grenfell Tower fire in 2017.

Building owners have to commission these EWS1 forms. Once complete and uploaded, they are used by the leaseholder and the lender to calculate risk and affordability.

But this process has presented a host of challenges for lenders, leaseholders and first-time borrowers. 

FTAdviser understands “unscrupulous individuals” are still signing off EWS1 forms fraudulently. And that forms aren’t always being stored on the Fire Industry Association (FIA) portal, due to the fact a registration fee is charged each time one is uploaded.

If EWS1 forms are not uploaded to the portal, lenders can’t see which properties are signed off as fire-proof. This significantly slows the process for borrowers looking to buy, remortgage, or borrow against a property without a certificate.

Nationwide’s head of property risk, Rob Stevens, confirmed the bank had “seen a handful of fraudulent forms”.

Earlier this year, the government tried to remedy this by investing £700,000 into training 2,000 additional assessors in the first half of 2021.

But a source told FTAdviser up to a third of forms still need to be back-loaded onto the FIA portal, and that fraudulent forms still need to be “weeded out”.

Whilst there are no reliable figures in terms of the number of buildings which need an EWS1 form, they estimated up to 6,000 forms hadn’t been filed out of about 12,000-18,000.

FTAdviser understands lenders are coming together to try and solve this, by footing the administration fee themselves.

The £100-£150 fee is believed to be discouraging engineers from uploading the forms. 

Currently, a lender has to ask a building owner to secure, and in many cases view, the form.

“All we want is an EWS1 certificate that says a property is safe,” Tony Hall, head of mortgage sales at Saffron Building Society, said.

Government confusion

The Ministry of Housing, Communities & Local Government (MHCL) said: “We condemn any criminality in relation to EWS1 forms and urge anyone with evidence of it to contact the police, trading standards and RICS [Royal Institution of Chartered Surveyors] so those responsible can be held to account.

"We continue to encourage a sensible, proportionate approach to risk and the new guidance from RICS means nearly 500,000 leaseholders should no longer need a form to sell or re-mortgage their homes."

RICS' updated guidance, which landed in March, was dubbed "a crucial step in unlocking the market", by ensuring that only those buildings where there are risks of costly remediation as a result of safety concerns from cladding are subject to additional checks, by Dame Janet Paraskeva, chair of its standards and regulation board.

But as multiple industry sources have told FTAdviser, the fact the government did not update its own guidance in line with RICS' has caused confusion, and fuelled in large part the disproportionate approaches being taken across the sector.

MHCL also acknowledged that the EWS1 "is not a government form, legal requirement or a building safety certificate". It continued: "We’re disappointed if this is still being asked for in some cases where it’s not necessary."

EWS1 forms were created by UK Finance, the Building Societies Association and RICS back in December 2019 to address the government’s advice note on building safety and cladding which only applied to buildings over 18 metres.

When the government's advice changed in January 2020 to include buildings of any height, a six-storey-plus approach to EWS1 forms was no longer applicable. Despite RICS' updated guidance, the government’s own advice note on building safety still applies to buildings of any height.

Urgency remains around EWS1 forms

Saffron's Hall highlighted some of the hoops mortgage applicants have had to jump through to secure an EWS1 form.

“The freeholder might not have applied for the certificate. Or the cladding might not be certifiable.

“Certifiability is key in the resalable status of a property. If the security isn’t readily saleable, then the property isn’t a good risk for lenders.

“Applicants often can’t get support from freeholders, because they’re too confused or stuck in the backlog [of other forms].”

Hall concluded: “If you haven’t got that certificate now, it’s a case of how soon you can get one.”

He also pointed out that an EWS1 form was only valid for five years. This prompted Hall to question: “What happens in five years' time?”

Each lender’s reliance on EWS1 forms varies depending on their risk appetite. Nationwide employs an in-house team to calculate buildings’ individual risks.

“Some people started asking for EWS1 forms on every building,” Stevens explained. “But we [at Nationwide] do it on a risk-based approach. This means we only ask for an EWS1 form on a small percentage of flats we lend on.”

When an EWS1 form comes back with an A3 or B2 rating - i.e. some combustible materials are present on the outside walls - Nationwide asks more questions.

“We dig into the construction of the building. Is it a standard brick-based building? Is the cladding just small and decorative?”

He continued: “Post-Grenfell, everyone was very nervous, which may have led to overcautious risk assessments. We [Nationwide] don’t want to put unnecessary burdens on flat owners and leaseholders for EWS1 forms.”

ruby.hinchliffe@ft.com