Many Scots who own flats in high rise blocks may be unaware their homes are effectively unsellable due to a lack of certification over cladding.
Owners hoping to sell or remortgage such properties, including luxury apartments worth hundreds of thousands of pounds, have been shocked to be told that they currently have “zero value”.
The development comes more than two years after the Grenfell disaster in which 72 people in a west London tower block lost their lives as flammable cladding caused fire to spread.
Mortgage lenders recently issued new guidance that properties over 18 metres high with any cladding must now provide written confirmation that they meet fire safety standards set out by the Ministry for Housing, Communities and Local Government, relating to external wall systems after Grenfell.
While properties built in Scotland in the last 15 years comply with high safety standards, without the specific documentation required they cannot meet the conditions lenders are imposing.
As a result, surveyors instructed to compile home reports in recent weeks have imposed “nil valuations”.
The issue has come to light after some owners tried to put flats on the market, unaware that the new requirements make them unmortgageable and therefore virtually impossible to sell.
A solution is yet to be found as those involved in the selling process, including solicitors, say they have had no clear guidance as to what tests are required or who is authorised to carry them out.
Those wishing to sell have therefore been left in limbo.
Transactions for some flats that were given home report valuations prior to the new policy have fallen through in some instances because prospective buyers were unable to secure a mortgage.
Meanwhile, cash buyers not requiring a mortgage have been put off from purchasing until the issue has been resolved.
It also affects those wanting to remortgage their homes, who have been unable to switch to cheaper products.
Flat owners are likely unaware their properties are 'unsellable'
The majority of high rise flat owners are likely unaware that their properties are currently effectively unsellable. Properties affected include some in Edinburgh’s luxury Western Harbour development.
Although the issue affects the whole of the UK, it is thought to have become apparent in Scotland first because of the requirement for home reports north of the border, which means valuations are called for far earlier in the sale process.
A summit, organised by Andy Wightman, the Scottish Green Party MSP for Lothian, took place in Edinburgh after he received more than a dozen emails from affected constituents.
Representatives from UK Finance, the trade association for the UK banking and financial services sector; Homes for Scotland, the house building trade body; the Royal Institution of Chartered Surveyors (RICS); the Edinburgh Solicitors Property Centre (ESPC) and Edinburgh Conveyancers Forum attended along with estate agents and surveyor firms.
Mr Wightman said: “We have had higher building standards since 2005, since the Fire Scotland Act, and we are not allowed to have buildings more than 18 metres that have got combustable material on the outside.
“What is concerning my constituents is that the flats that they are trying to sell should comply with building standards - yet they are at a standstill.
“I’ve one constituent says she has bought somewhere and she is due to move in in ten days but the sale (of her own flat) looks like it’s fallen through.”
Grenfell triggered extra caution over cladding
Paul Hilton, chief executive of the ESPC, said that in light of Grenfell it was right that there should be a “higher state of awareness around potential issues with cladding”.
However, he said the new guidance to surveyors had resulted in “challenges” getting safe properties on to the market.
Although the properties have already been passed by council-run building control as fit for habitation, surveyors would not commit to a valuation without a seeing a report on the cladding.
He said properties listed before the change in guidance were hitting another “bottleneck” when buyers were found as lenders called for certification to give the all-clear.
He said: “As far as we are aware, there is no building at the moment that we think there is an issue with, particularly in and around Edinburgh where we operate. We are convinced they will get a clean bill of health but until it’s in writing from someone that’s approved by the lenders there lies the bottleneck and that’s what needs to change.
“The safety first approach is the right one but I think we need clarity in to exactly what is the standard that’s required and who is allowed to do these reports.
“The ideal outcome is that we get the guidance and then each block has this certification done and that sits somewhere centrally so that any buyer or buyer’s solicitor can look it up.”
Property solicitor Dot Mullally, a partner with Edinburgh-based law firm McDougall McQueen, said: “This is an extremely concerning development for owners of high rise flats and we have a great deal of sympathy for our clients who find themselves in this difficult situation.
“We are working along with our clients to try to get the necessary reports to establish that they are safe and remain suitable for mortgage lending.”
A UK Finance spokesperson said: “As with any mortgage application, each lender will consider whether to lend on a case-by-case basis. UK Finance is working with RICS on guidance on this issue which is due to be published shortly.”
Edinburgh resident says her flat is 'worthless'
A woman has warned other property owners and buyers after her flat was deemed “worthless” amid the recent cladding certification crisis.
Nickie Eden lives in a flat with her husband in Western Harbour Bay in the Capital.
The couple were in the process of selling it, but have been told it’s of no value due to a lack of certification over cladding.
“It’s completely bonkers,” Mrs Eden said.
“Because we don’t have this certification, which doesn’t appear to exist in Scotland, our property is worth nothing and we can’t complete the sale.”
Mrs Eden said her solicitors at Moving Eight alerted her to the issue last week.
Her buyers were due to move in on November 22 as their current lease runs out in a couple of weeks.
But with the demand for an official document assuring lenders - in this case NatWest - of cladding safety, the move has been put on hold and the buyers and sellers are in limbo.
“The banks are just very risk averse, which is understandable since Grenfell,” she continued.
“But the worry thing thing about this is that there are no parameters in place in Scotland for cladding safety checks, so what are we supposed to do?
“It must be for safety, which I am really in favour for, but one size doesn’t fit all and it’s just completely bought everything to a standstill with regards to selling a flat in this building.”
Official response has been 'slow'
The area manager at L’Oreal said since raising the issue with the government, little has been achieved.
"It's really worry for owners in this situation who are wanting to sell because surveyors are going round and saying some of these properties are 'zero value,'" she added.
In an email from Andy Wightman to Mrs Eden seen by the Evening News, the MSP says: “I convened a meeting of surveyors, solicitors and other professionals involved in building, conveyancing and valuation on Friday 11 October. The meeting was attended by a representative of the Scottish Government.
“It was a very useful meeting and we will be meeting again towards the end of November.”
But given Mrs Eden’s original moving-out date, she’s been left feeling helpless.
“No one seems to be treating it with a matter of urgency, but it’s a serious issue. This poor couple due to move in could be homeless because of this.
“Luckily we reserved the place we’re buying. It’s a new build and the builders are being very patient, and in the worst case scenario we can just stay here. But I really feel for the new couple.
“I was talking with my solicitors and they said about 30 percent of Scotland’s property market could crash because of this. Edinburgh might be on its knees soon.”
New buyers are left with nowhere to live
Robyn Deeley, who was due to move in to the Western Harbour home with her boyfriend said she “had her heart set on the flat.”
“We had been searching for ages and were so relieved when we found this place,” she said.
“Now we just don’t know if it’s actually going to go through or not, it’s unsettling.
“It seems a bit ridiculous that all this is put on hold due to a piece of paper.”
Ms Deeley said there has been little communication about how to receive help in this situation.
She said: “I have tried to Google this cladding issue and only saw one article about it and there isn’t really any guidance on what to do. We have booked to stay in an AirBnB in the meantime, but it’s coming up to Christmas and prices are skyrocketing so it’s a bit concerning, I don’t know what we are going to do.”
A NatWest spokeswoman said: “When making lending decisions, in part we rely upon the professional advice of independent valuers. The valuer must assess each case in accordance with the RICS Valuation Standards.
The uncertainty around the performance of cladding materials in a fire is proving a challenging issue UK wide. We are currently working with various industry bodies to understand best how to support our customers.”
A Council spokesperson said: “We sympathise with the difficulties people selling their properties are finding themselves in. We’re aware that these requests for certification of cladding are increasingly being made during the buying and selling process.
"Following the Grenfell fire we checked the plans for these buildings and they did not indicate that combustible ACM cladding had been specified.
"As an extra step, we wrote to the factors of private properties to remind them of their legal obligation to have the materials used on the buildings they manage checked.”