The Daily Telegraph - Saturday - Money
Homeowners face 40pc loss to sell cladding flats to cash buyers
Residents in flats with dangerous cladding must wait years for problems to be resolved or face selling their properties at huge losses to cash buyers.
The cladding crisis has swept through the property market and left tens of thousands of homeowners unable to sell their properties, as they do not have certification that proves their buildings are safe. Without this proof, banks will not offer mortgages, blocking the vast majority of would-be buyers from purchasing.
This deadlock has left sellers reliant on cash buyers, but few ordinary people want to buy homes that may require major, expensive repair works in the near future. Property buying firms are able to purchase homes in cash, but demand hefty discounts of about 40pc from distressed sellers.
Yet this may be the only option for those desperate to leave their flat, unless they wait years for repairs to be carried out.
Danny Ribero, 32, bought a flat in Clapham, south London in 2014. He used a shared ownership scheme to buy a 40pc stake of his one-bedroom flat. He recently applied to increase his ownership to 75pc but was rejected because his development, Bicycle Mews, does not have a valid External Wall Fire Review ( EWS1) form. Without this he cannot change his mortgage and purchase a greater share of the flat.
His housing association, Notting Hill Genesis, has been unable to provide him with the EWS1 certificate or provide a date when crucial cladding checks will be carried out. As his block is five storeys high, other taller buildings have been given priority.
“I’ve been endlessly chasing them since June and I am often ignored or simply told they’re looking into it,” Mr Ribero said.
Others in his block have been unable to sell their homes thanks to this administrative nightmare. Mr Ribero said some residents were considering a quick cash sale, but would have to give a huge discount from what they paid. These losses would bankrupt the homeowners, unless they had significant cash savings to fall back on.
Cladding campaigner Deepa Longley said residents looking to sell for cash were typically asked for a 40pc discount from market value by property buying agents. Many have also been forced to include clauses that allow the price to be reduced if further defects are uncovered.
This newspaper has seen one flat in Manchester advertised with a £70,000 discount on the asking price, as cladding issues have left the property unmortgageable.
Typical cash buyers, such as downsizers, have been warned against purchasing properties in blocks with cladding. A Telegraph Money article last month warned that older buyers were putting their retirement plans in jeopardy by purchasing these flats. In several cases cash buyers have been asked to pay unexpected repair bills of up to £50,000 out of their pensions.
Residents like Mr Ribero face years of waiting for their cladding issues to be resolved. He has been told his building checks may not take place until March 2022. If problems are uncovered then repair works could be necessary, which would mean an even longer wait for residents.
“I understand the need to prioritise but this is madness,” he said. “What if any remedial works are necessary? How many more years will we be in this situation?”
A Notting Hill Genesis spokesman said it “recognised the difficult situation many of our leaseholders are in” thanks to the cladding crisis.
The housing association said buildings had been prioritised based on height, construction materials and evacuation strategy.
Notting Hill Genesis said it hoped to assess the Bicycle Mews development in the 2021/22 financial year, but it had been hamstrung by a lack of fire engineers available to assess its buildings.
“This is a national issue and there are a huge number of buildings that need to be investigated and a limited number of qualified fire consultants able to carry out that work,” it said.
Delays have also affected the Government’s £1bn Building Safety Fund. Official figures released this week showed that owners of 2,820 blocks have applied for funding to fix cladding problems, but only 294 are currently scheduled to proceed.
More than 1,100 applicants – 39pc of the total – have failed to provide enough basic information for a decision to be made. A further 502 applications have failed or been withdrawn, representing 18pc of all requests.
On Thursday the Ministry of Housing, Communities and Local Government ceded to calls from campaigners and extended the deadline by when property owners must apply to the fund.
Submissions now must be completed by June 30 2021. The Government did not announce any further funding for the £1bn pot, which campaigners say falls woefully short of the £40bn needed to fix the cladding crisis.
However, a new £ 30m fund was announced to help residents whose properties must be monitored 24/7 by fire wardens. The cost of these so- called “waking watches” commonly reaches thousands of pounds per year. However, as a Telegraph Money investigation revealed last month, wardens have been found sleeping on the job and firms accused of profiteering from vulnerable residents. The £30m fund will help pay for fire alarms so that some waking watches can be removed.
Robert Jenrick, the Housing Secretary, has written to Trading Standards calling for it to investigate whether firms providing these services are charging residents disproportionate fees. Mr Jenrick said: “I’ve heard firsthand from leaseholders the misery that rip- off waking watch costs have been bringing to residents of high-rise buildings with cladding.”
‘What if remedial works are necessary? How many more years will we be in this situation?’