Leaseholders hit again by cost increases

Going up… the increase in the National Living Wage will hit leaseholders in 2020

Many services such as cleaning and gardening contracts provided to blocks of flats rely on minimum wage labour.  With the National Living Wage rising in April this year from £8.21 to £8.72 for workers over the age of 25 –  an increase of some 6.2% – once again leaseholders are going to feel the pain.

Leaseholders who are unable to recover VAT on the service charges they pay, continue to suffer from VAT increasing from the previous long term norm of 17.5% to 20% in 2011.  Flat owners, via their service charge, have also suffered continual rises in insurance premiums due to both five years of IPT (insurance premium tax) increases from 6% to 12% since 2015; the abolition of the 3.4% national insurance rebate on porters wages; and a rise from 2% – 3% in employers auto-enrolment pension contributions.

Added to this, the rise in the minimum wage may be small but it is yet another expense to hit leaseholders, already living with the spectre of big bills for safety improvements on their blocks (see our 9 January blog for more on this).

At Ringley all our Relationship Managers are now letting clients know in advance of their March/April budgets that, to be prudent, provisions must be made for these cost increases.

How the new cladding form could get the flat sales market moving again

Grenfell ‘Tower continues to cast its long shadow over the flat sales market – but a new form may help

Yesterday, a new form (EWS 1) was launched, designed to record what testing has been carried out on the external wall construction of HRRBs – buildings more than 18m high. This is good news for leaseholders – and building owners and managers.

Since the Ministry of Housing, Communities and Local Government (MHCLG) Advice Note 14 was adopted by lenders, many flat owners have had problems getting mortgages, or even remortgages, on HRRBs (high risk residential buildings). 

Developers are often willing to provide a statement of what was specified (but as we know – that might not be what was installed) but lenders won’t necessarily accept them for lending purposes.  Flat owners who bought their homes before the Advice Note came into force, are left unable to remortgage – and may even be facing higher interest rates on their mortgage as a penalty for something that is entirely beyond their control. 

AN14 called for surveyors to provide proof that buildings don’t have dangerous cladding and has stalled mortgage offers while assessments are done, trapping leaseholders in flats that have become unsellable. In many cases, valuers have erred on the side of caution and set the value of some properties at zero. ARMA CEO Nigel Glen reports that one of his members has at least 500 stalled sales as a result. That firm is not alone.

So what’s the difference between AN14 and the new EWS 1? One big change is that there is now a line telling lenders and buyers that they cannot rely on the form – only the building owner/manager can. At first glance this doesn’t sound helpful but the authors have worked hard to ensure it will unlock the current snarl-up in the flat sales market.

This is how it is hoped it will work:

To-date, fire risk assessors have provided their opinion on the safety or otherwise of blocks to the building owner and so could end up answerable to any third party who relies on the report. That assessor is potentially liable to multiple lenders and buyers. Assessors’ indemnity insurance premiums have gone through the roof – and some can’t get insurance at all. This means buildings can’t be assessed and the whole process grinds to a halt.

The new form allows assessors to disclaim liability to everyone but the person who commissioned the report. Mortgage lenders can decide for themselves whether or the information can be relied on. The general feeling is that at least some will.

There are also two distinct alternatives listed in EWS 1 for assessors to choose:

Option A – external wall materials are unlikely to support combustion; or

Option B – combustible materials are present in the external wall.

It is likely that an invasive inspection will be almost always be required – desktop exercises are out. Good.  And any investigation must include evidence of the fire performance of the actual materials installed. This means safe buildings can be recorded in a way that will – hopefully – get the market moving.

We are pleased that there is now an approved form and ‘declaration’ to give much-needed help to leaseholders. However, the challenge is that ultimately this cladding problem is still costing the homeowner. Invasive testing is now pretty much a requirement on HRRBs, often at more than £5,000 a time.

Remediating the many buildings that are failing inspections has to be a priority for 2020. And it’s one the government should not leave to chance.

Property managers take centre stage on safety

Dame Judith Hackitt’s recommendations are now being firmed up, so watch this space.

Ringley CEO Mary-Anne Bowring was joined by Life by Ringley MD Sam Hay at an RICS event in Manchester in November to talk about the future of building safety.

Last month, we blogged about the ‘golden thread’ of data that Dame Judith Hackitt’s building safety review is recommending should be established for every high-risk residential building (ie, one that is 10 storeys or higher) in the country. The review also sets out the framework for a new ‘Joint Competent Authority’ to ensure that safety is placed firmly at the heart of the property industry.

The Hackitt review proposes the new JCA should have an overarching role, bringing together local authority building standards, fire and rescue authorities and the HSE. The report recognises the role that the CDM regulations have had in improving accountability and responsibility for safety and sees a future where these bodies all work together to maximize the focus on building safety within HRRBs across the entire building lifecycle. The recommendation is this: the best way to get genuinely effective safety management is to establish a new body that ensures feed in from other bodies is made an absolute requirement.

As we explained in our previous blog, one of the key responsibilities of the proposed JCA will be to create and maintain a database of all HRRBs and key duty holders for those buildings – whether under construction or already occupied. It will also ensure duty holders focus on mitigating building safety risks during the design and construction phase.

A new role of building safety manager will also be created – above and beyond the role of the property manager. The increased focus on reducing ongoing safety risks in HRRBs is not the property manager’s job – and is certainly not achievable within the same base management fee per unit.

The responsibilities that will fall to the building safety manager are likely to include:

  • periodic safety case reviews to demonstrate that building safety is being maintained and that residents are properly engaged (this may also be triggered if a significant refurbishment is planned); and
  • dutyholders required to make building improvements where necessary, to reduce building risks so far as is reasonably practicable.

The JCA is a new independent body and will be expected to assess and deal with immediate ad-hoc building safety concerns on HRRBs including:

  • the mandatory reporting of safety concerns by dutyholders;
  • referrals made by Environmental Health Officers (EHOs);
  • escalated referrals made by residents of HRRBs.

The JCA can also expect to:

  • request testing of construction products that are critical to HRRB building safety on a reactive basis when concerns arise, including information exchanges with all HRRB dutyholders in exceptional circumstances.
  • request annual reports from product testing houses providing summary details of the types of tests carried out and the numbers of passes and fails reported; and
  • help the proposed new government body to validate and assure the guidance produced by industry to meet the outcomes-based goals of the Building Regulations.

So a whole new raft of responsibilities then. Enhanced levels of training will be required as the industry gets to grip with the new regime – and there may be a need for higher levels of PI insurance for block managers as they take on these obligations. At present these are only recommendations but watch this space – our industry is changing and there will be more to come.

Fire brigade takes on block owners over cladding

Frustrated by “lack of action” West Yorkshire Fire and Rescue Service is taking matters into its own hands

Wow. The problem of combustible cladding on residential blocks just went up a level. Following the continued failure of building owners to replace unsafe cladding on 10 blocks in Leeds, Bradford and Huddersfield, West Yorkshire Fire and Rescue Service is threatening “prohibition of the entire building, or parts of it” if the owners can’t reassure them that they are taking action.

All the buildings were found to have dangerous cladding shortly after the Grenfell Tower fire in June 2017, with WYFRS pointing to a “lack of action” from some of those legally responsible for the blocks.

Property magazine Inside Housing contacted the owners of all the buildings involved and did receive assurances that they are working to tackle the problem. However, the latest government figures show that 318 of 436 buildings with Grenfell-style cladding have yet to complete remediation work.

An unknown number of other high and medium-rise buildings have been found with dangerous cladding of other kinds – a figure which it is thought could run into the tens of thousands.

In a move which – depending on your political viewpoint – could either be considered as unashamedly wooing leaseholders or simply doing the right thing, the Labour Party yesterday published a last-minute housing manifesto promising tough action on cladding removal.

The 20-page document updates Labour’s previous position on fire safety and pledges to:

  • Name and shame building owners who have yet to remove dangerous cladding and set a deadline for them to put a remediation plan in place.
  • Pass emergency legislation placing responsibility on owners to do the work, with powers put in place for councils to impose fines, followed by the “takeover” by the state of blocks that don’t have a plan.
  • An immediate widening of the government-sponsored testing regime to cover other forms of dangerous cladding
  • Set up a national task force, with the involvement of residents, to inspect buildings and prioritise fire safety work
  • Find additional funding to help pay for this work

It is unclear exactly how the state might “take over” blocks that don’t comply with a set removal deadline. This prospect would certainly be enough to put some voters off.

In fact, these dangerous materials could have been banned years ago by Labour following incidents in Germany and USA, who simply banned these ACM cladding products. The government at that time should have had its eyes and ears open and done the same!

Don’t forget to test your smoke alarm!

This could save your life – so make sure it’s working properly

In the same week that the fire service reported that a worrying number of smoke alarms in rental properties don’t work, the Royal Institute of British Architects (RIBA) has told the government that sprinklers shouldn’t be seen as the answer to all fire safety problems in blocks of flats.

The architects’ body supports the use of sprinklers in high-rise flats, describing them as a “highly effective means of life protection”. But they also point out that installing sprinklers “should not be used as a means to compensate for other essential life safety measures or to justify reducing minimum standards.”

As well as sprinklers, RIBA say centrally addressable fire alarm systems should be required in new and converted multiple occupancy residential buildings.

We wholeheartedly agree with Jane Duncan, chair of the RIBA Expert Advisory Group for Fire Safety, when she says “It is over two years since the Grenfell Tower tragedy, yet far too little has changed”.

The English fire regulations are not fit for purpose, she says. It’s not right that we should lag behind both Scotland (where sprinklers will soon be required in all multiple occupancy residential buildings) and Wales, where sprinklers have been required in all new and converted residential buildings since 2013.  

So we join RIBA in calling on the next government to maintain a strong focus on fire safety and give absolute priority to the radical overhaul of the building regulations that is so badly needed.

To that we would add a plea to all landlords, property managers and residents to check their smoke and fire alarms regularly. This is as important for BTL landlords and their tenants as it is for leaseholders.

And it’s especially important at this time of year when we are all plugging in our Christmas lights and using more candles and open fires. So if you have battery-operated alarms, check and change the batteries regularly. No matter how annoying it is when they go off by mistake when you’re making toast, don’t ever be tempted to remove the batteries – that alarm could save your life.

Emergency evacuation – we can help

If you need help leaving your home in an emergency, let us know.

Last week, the BBC carried a story about the problems faced by disabled residents living in flats if they need to evacuate their homes in a fire.  One council tenant commented that she had received no communication from her local authority explaining what their evacuation policy is, so she decided to take matters into her own hands.

This lady has sensibly spoken to her neighbours and asked a group of them to help carry her out of the building if they need to escape the building in an emergency. The BBC investigated around 700 London blocks, speaking to residents about the arrangements for their buildings. They didn’t find a single evacuation lift.

At Ringley, since the Grenfell Tower fire, we have been following the work being done by the government on building safety and closely monitoring the leading industry analysis. We recently took part in RICS CPD events on the changes that are coming through as a result of the 2017 tragedy.

The challenge for the property sector is that rarely are regulations retrospective; as the BBC pointed out, there are few buildings with special fire evacuation lifts.  The advice is always that standard lifts should not be used for evacuation in case of fire because, unless suitably adapted and protected, lift shafts act as a funnel, enabling smoke to spread through the building. Generally, electrics automatically shut down during a fire and fire fighting lifts run off of emergency generators, not from mains electricity.

There is now work going on in this area to identify whether adaptations to buildings could be made to incorporate purpose-built evacuation lifts, so the regulations around lift use may change in future. In 2018 the government instructed a review of the approved building regulations document relating to fire and we await the outcome with interest.

In the meantime, what we do at Ringley to look after our disabled residents as best we can, is to write to owners and residents asking them to let us know if they or their neighbours need ‘special assistance’ in case of an emergency evacuation. We database this information so that should such an emergency arise we can liaise with the fire department to enable them to help those that need it most.

So if you or one of your neighbours is worried about how they would escape the building in the worst case scenario, please call or email us to let us know. Our most important job is to keep residents safe.

Terrorism: is your block policy right for you?

Don’t get caught out without the right insurance

With vigils held earlier today for the people killed and injured in Friday’s horrific terror attack at London Bridge, our thoughts are with the friends and families of the victims. And as leasehold specialists, the team here at Ringley is also well aware of the implications of the threat of terrorism for property managers, their clients, and residents.

Terrorism cover used to be included in block buildings insurance policies up to a certain limit. In 2003, this was replaced by full all-risks terrorism insurance from the government-backed Pool Re scheme. Other less comprehensive (and cheaper) policies are also available in the London Lloyd’s market.

It is likely to be a condition of the lease that blocks are covered and the RICS Service Charge Residential Code recommends giving terrorism insurance “serious consideration”. Anyone who arranges buildings insurance must ensure they comply with the terms of the lease and the Mortgage Lenders Handbook. If either of these states that “all risks” or “explosion” need to be covered, your block must have terrorism insurance. If the worst were to happen, non-compliance would mean the building owner or, in self-managing blocks the RMC directors, being held responsible. This could put personal assets at risk. For leaseholders, if an act of terrorism damages your block, you will still have to pay your mortgage and find the money for alternative accommodation while repairs or rebuilding takes place.   So the right cover is vital.

The other aspect to take into account is the impact on residents, not necessarily of a direct attack on their home but of any incident close by. On Friday, immediately following the events at London Bridge, the police put the whole area into lockdown. As with the 2017 attacks at nearby Borough Market, local residents were told they couldn’t go home and must find somewhere else to stay.

As soon as any claim is made, blocks covered by the Pool Re policy will be paid out by their insurer who will then recover the costs. This means, if needed, temporary accommodation will be paid for. Other schemes may not pay out until the incident has been certified by the government as terrorism – which may take a day or two – and residents may be left out of pocket.  So before taking out a policy that looks like good value, read the small print carefully.

Statistically, the chances of a residential block being targeted by terrorists are low – in fact, they are literally one in a million according to disaster experts. But with apartment blocks springing up all over our towns and cities, it is still possible that your building may be affected. So check your lease – and your insurance policy – to make sure you don’t fall foul of the law or leave residents unprotected.

How a ‘golden thread’ of data will help keep residents safe

Sam Hay (left) and Mary-Anne Bowring (right) spoke to RICS members about the future of building safety in Manchester on Wednesday

At an RICS event in Manchester yesterday Ringley CEO Mary-Anne Bowring and LifebyRingley MD Sam Hay spoke about the impact on block management of Dame Judith Hackitt’s building safety review. For now, this only applies to high-risk residential buildings (HRRBs) – which are defined as those with 10 or more storeys.

One big idea is the proposal to create a ‘golden thread’ of key information about every new HRRB in the country. This data is to be digitally recorded, maintained and made readily available to all stakeholders, including residents.

The kind of information that will be recorded is

  • Size and height of the building
  • Structure
  • Building fabric
  • Escape and fire compartmentation information
  • Systems in operation
  • Permanent fixtures and fittings

This will not only apply to new buildings, so you can imagine the difficulty in retrospectively piecing this together for existing stock. There are estimated to be between 2,000 and 3,000 such buildings in the UK.

Block managers are only too well aware that a lack of complete, accurate and properly maintained building information is common and throws up a number of challenges. The building owner doesn’t have to keep the information that is required to be able to easily and effectively manage building safety throughout the building life cycle so it is often virtually impossible to work out whether any changes have been made between the original design and completion. This may have an impact on the building safety strategy as modifications and refurbishments are made over the years.

The worry here is that what gets lost is the fire scheme, as originally conceived. Also when carrying out a major works project or fully refurbishing a building, it is difficult for both block managers and their contractors to work out what impact any changes might have on safety in that building.

This information gap has become all too clear during the inquiry into the Grenfell fire, where a recent refurbishment contributed to the tragic loss of life. In future, with everyone involved in the operation and maintenance of the building as well as the fire service having access to this ‘golden thread’, building design will be made completely transparent. Any changes that could impact safety can then be managed through a formal review process – another of Dame Judith’s recommendations which Mary-Anne and Sam also discussed with their audience.

 Of course, as we point out above, these proposed changes only apply to HRRBs, ie those blocks that are above 18m high. But anything designed to keep flat owners and renters safer in their beds is to be applauded. At least it’s a start.

Parties promise big on housing – but can they deliver?

Training will be vital to tackle skills shortages but more is needed if we are to solve the housing crisis

This morning the two main political parties both made election commitments to deliver much-needed housing.  Labour’s manifesto promises £75bn to deliver the biggest social housebuilding programme since the 1960s. The party has set itself the task of providing 100,000 council houses a year by 2024  – a tall order in anybody’s book.

The Conservatives are also promising major change –   announcing a number of policies alongside their million homes pledge, which includes an overhaul of the planning system.

In contrast to Labour, the Tories would not use public money to build more homes, but instead, plan to promote policies encouraging the private sector to deliver the housing stock we need. Today’s announcements included the promise of a new mortgage with long-term fixed rates and a 5% deposit to help renters get on the property ladder. They also pledged to start a new scheme giving first-time buyers a 30% discount on new homes in their area.

Yesterday, the Liberal Democrats promised to build 300,000 homes a year by 2024, including 100,000 social homes. And the Green Party manifesto also promises an extra 100,000 council houses a year.

These pledges are welcome. We are well-aware that the country faces an ongoing housing crisis with too few affordable houses and property prices putting a first home out of reach for many young people. However, the question has to be asked, how is all this to be achieved?

Labour’s Angela Rayner may have got hackles rising in the building trades this morning as she asserted that it doesn’t take long to train to be a plasterer. A six -month training course is all that’s needed, she said. This is debatable but what is certain is that the construction industry is facing serious skills shortages that are likely to get worse post-Brexit. Labour’s pledge to train more workers is one solution but it is likely to take a lot longer than six months to get boots on the ground.

Whichever party ends up forming the next government, if serious numbers of homes are to be built they will need to get to grips with not only skills shortages but with a range of other long-neglected issues. Re-skilling and streamlining planning and building control will be vital, as is a shift towards modular construction to take the heat out of those shortages and ensure quality and compliance. And new financial models and incentives are desperately needed to get developers building affordable homes.

Without attention to detail, nothing will change.

Heat networks: have your say

Do you manage a building with a communal heat network, or own a flat or a building that uses one? If so, you’re certainly not alone. Did you know there are at least 14,000 heat networks in the UK – we didn’t! These include both district heat networks which supply multiple sites and the communal heating systems that supply a number of units within a single building, with which many property managers will be familiar.

The UK is committed to achieving net-zero emissions by 2050 and heat decarbonisation is one of the biggest challenges.  The Government thinks heat networks are crucial to meeting this target because they are uniquely placed to unlock otherwise inaccessible sources of larger-scale renewable and recovered heat sources such as waste and heat from rivers and mines. In the right circumstances, heat networks can reduce bills, support local regeneration and are a cost-effective way of reducing carbon emissions from heating. 

The Government is now consulting on proposed amendments to the Heat Network (Metering and Billing) Regulations 2014 to make them more effective for suppliers and users. The current regulations set out rules around installation of heat meters and billing for customers. The meters enable suppliers to produce fair and transparent bills based on actual consumption  – and like domestic Smart Meters, they can drive energy efficiency savings and cost reductions.

In some cases, the requirement to install heat meters and heat cost allocators is subject to a ‘cost-effectiveness’ test set out in the regulations.  The consultation explains how cost-effectiveness is measured. It includes proposals to update the way it is assessed and describes how the cost-effectiveness tool for heat suppliers will be amended. The changes will affect those suppliers with buildings where a cost-effectiveness assessment is required but where, to-date, the tool has not been available.

The government also proposes to extend the provisions set out in the regulations covering meter accuracy, maintenance, and billing based on consumption to all existing metering devices. These requirements would extend the regulations to some heat suppliers who, at present, don’t have to comply.

The thinking here is that metering accuracy and maintenance, as well as billing based on consumption where cost-effective, are vital to delivery and help maximise the benefits of metering. They should therefore apply to all installed metering devices. 

Finally, the consultation contains several proposals clarifying areas where the current regulations are unclear and it includes a provision to support the enforcement of meter accuracy and maintenance.

The changes are expected to increase the number of customers with heat meters installed and the government is keen to hear from industry and from customer representatives.  If you have a view on heat networks and/or metering, you still have time to respond. The closing date has been extended from 12 December to 9 January 2020 because of the general election, so if you haven’t had the chance, take a closer look at the changes here.