Source · Select Committees · Public Accounts Committee
Recommendation 4
4
The Department has not done enough to address spiralling insurance costs and ‘nil’ mortgage valuations.
Conclusion
The Department has not done enough to address spiralling insurance costs and ‘nil’ mortgage valuations. Private leaseholders in blocks with dangerous cladding have received ‘nil’ valuations for their properties, meaning they have found it impossible to sell or remortgage, while their insurance premiums have risen over 400% in some cases. The Department’s introduction of an External Wall Fire Review process in December 2019 was designed to provide assurances to lenders and buyers where the external walls of apartment blocks had been inspected for safety. However, qualified professionals have had difficulty accessing the personal indemnity insurance needed to undertake these reviews, which has reduced the Progress in remediating dangerous cladding 7 availability of these inspections. In addition, following changes to departmental guidance to assess and manage the risk of external fire spread to buildings of any height, there is uncertainty whether the External Wall Fire Review process should also now apply to lower-storey buildings. The Department tells us that this is an ‘industry issue’, with efforts to address the problems with the review process being industry-led, but in our view the Department needs to step up and ensure matters are resolved quickly. Recommendation: The Department should ensure that cross-sector work to resolve issues with the External Wall Fire Review process progress at pace. As part of this cross-sector work, the Department must ensure that professionals can acquire indemnity insurance, and leaseholders are not facing escalating insurance premiums. The Department should write to us within three months setting out its assurance that these processes are operating effectively.
Government Response
Not Addressed
HM Government
Not Addressed
5: PAC conclusion: The Department has not done enough to address spiraling insurance costs and ‘nil’ mortgage valuations. 5: PAC recommendation: The Department should ensure that cross-sector work to resolve issues with the External Wall Fire Review process progress at pace. As part of this cross-sector work, the Department must ensure that professionals can acquire indemnity insurance, and leaseholders are not facing escalating insurance premiums. The Department should write to us within three months setting out its assurance that these processes are operating effectively. 5.1 The government agrees with the Committee’s recommendation. Target implementation date: May 2021 5.2 The External Wall Fire Review process (EWS1 form) was introduced by the Royal Institution of Chartered Surveyors (RICS), UK Finance and the Building Societies Association in December 2019, to support the valuation of high-rise residential buildings over 18 metres. Industry did not design the form to be used on residential buildings under 18 metres, except in very specific and justifiable circumstances. 5.3 The EWS1 form is not a departmental document or regulatory requirement. Guidance published on the advice of the Independent Expert Advisory Panel (IEAP) in January 2020 highlighted the requirements in existing building regulations around fire spread on external walls. 5.4 The department is aware that some lenders and valuers are using the RICS EWS1 valuation process for multi-storey, multi-occupancy residential blocks of any height. The department does not support this blanket approach, especially for lower rise blocks. The department has therefore been encouraging lenders to adopt a more proportionate response and use other equivalent evidence to support building safety and valuation assessments. 5.5 The department is aware of challenges with the capacity of professional fire expertise and associated public indemnity insurance constraints. With industry, the department has several joint workstreams actively seeking to address this. 5.6 The department is also aware of challenges in accessing affordable buildings insurance for some blocks with building safety concerns. Officials are working with industry to understand this better. 5.7 The department will write to the Committee updating them on progress by the end of December 2020.