People living in properties surrounded by Grenfell Tower-style cladding have been urged to wait until it gets replaced – rather than sell at a significant loss.
Last month The Guardian reported that a flat owner in New Capital Quay in Greenwich, which has flammable cladding, saw her property value fall by 90% from £475,000 to £50,000 after taking out a home survey.
Replacing the cladding could cost between £30m and £40m. But the developer Galliard Homes and warranty provider National House Building Council are currently locked in a dispute regarding who is liable and should pay.
Ray Boulger, senior technical manager of John Charcol, said: “The people who own these properties are not going to be the freeholders, so to some extent it’s going to be outside their control if it gets sorted.
“But I would imagine the government will force the local authorities or other freeholders to change this property within two or three years.
“If I was in one of these properties the sensible solution would be to sit tight and wait for the cladding to be redone.”
But he added: “A lot of them have mortgages and they are going to be coming to the end of their deals before the legal situation will be resolved.
“In the short-term they are completely strangled.
“They get added to the list of mortgage prisoners – they are not going to be able to remortgage if the value has gone down that much.”
He suggested renting the property out if possible during this interim period.
Tony Ward, chief executive of Home Funding, agreed that the sensible thing is to wait it out.
However he hinted that for people frightened of being caught in another horrific blaze, it may not seem like an attractive solution.
He said: “You have to weigh up your own personal family situation and whether you feel safe. At what price does safety come?
“If you’re unsure are you prepared to take a significant write-down to get out of it?
“The sensible thing from a financial situation is to sit tight.”
Kate Faulkner, property analyst, agreed that renting out the flat is probably the best option for a lot of people.
However she was disgusted by the reluctance across the property industry to take responsibility.
She called for more collaboration to fund improvements, in a similar way to Flood Re in the insurance industry, when unforeseen disasters strike.
Faulkner said: “The industry should have a process – from lender, to insurer, to surveyor, to property management agency – of dealing with situations that can cause fluctuations and fear from a valuation perspective.
“People should sit round a table and come up with a fair policy.
“This is a terrible blame game industry.
“The people we’re supposed to be looking after are the consumers – they have got to come first.”
People with a mortgage wanting to rent out the property would need to contact their lender or a broker to discuss the issue first.
Those with home insurance first have to refer to the Things You Need to Know Before Purchasing Home Insurance and based on the information provided, they would need to notify their insurer if they started renting out their flat rather than living in it themselves, or it could be voided.
James Ginley, technical director of Legal & General Surveying Services, noted that there’s a danger of some scaremongering when it comes to stories about significant down-valuations after disasters, as he said “you can get valuers to have extreme positions with some of these things”.
He reckoned things will change once building regulations adapt to what happened at Grenfell.
Ginley called for more joined-up thinking when it comes to assessing the fire risk of an entire building, rather than analysing its separate components.
He said: “Change will come when building regulation changes filter through.
“Currently building regulations are made up of different parts – assessing things for fire and structural integrity – but rarely as a whole.
“With Grenfell essentially you’ve got a converted building where asbestos was ripped out.
“1960s buildings used asbestos to prevent the spread of fire, then of course over time it’s been realised that asbestos has effects that can be extreme – so those buildings are upgraded.
“Building regulations will start to acknowledge that things need to be interlinked.”
Galliard Homes was approached for comment.
