Understanding cladding legislation updates

We explore the effect for property portfolio values, potential funding opportunities and how we can help.

There is often a fine line between the positive impact of the design and structure of a building; safety, efficiency and its visual appeal, to one that causes concerns and potentially puts people at risk.

Recently, tragedies like The Grenfell tower block, have highlighted failings in building materials and building processes that some companies are guilty of or at the least miss-management of the design and installation process. As alarming as sub-standard contractors, is the fact that some of the current building regulations in place, allowed for life-threatening procedures to contribute to the fire in June 2017 and the tragic loss of lives.

Grenfell has seen all cladding singled out as a safety issue, which is untrue. Reactions like this are generally due to a lack of information and technical knowledge, along with media hysteria. Like any material, cladding is a safe and efficient option when in the control of organisations with industry expertise. In this Insight, Starfish Construction Group will provide you with a comprehensive overview of cladding – the product, legislation, safety and options.

As the implementation of changes and further review of building regulations continue, at Starfish Construction we will also explore the existing and new legislation, recent legal cases and an industry-wide process agreed for the valuation of high-rise buildings.

To help summarise the type of cladding used on Grenfell Tower, and some, estimated, 437 other buildings over 18 metres (high-rise) in the UK, let us try and outline some key facts.

Aluminium Composite Materials (ACM), was commonly used as an economical solution, typically with a polyethene core and different surface finishes. Building Regulation part B in England requires that all insulation and filler materials on the walls of high-rise building are of "limited combustibility". The ACM panels do not fulfil the role of insulation and have no particular insulative properties. This confusion and, resulting loophole in the regulations mean that polyethene core ACMs used on high-rise buildings were in compliance with Building Regulation B, as is the case at Grenfell Tower.

Studies commissioned by the Government, and carried out by Building Research Establishment (BRE), two years before the Grenfell Tower tragedy, highlighted the danger of fire spreading through concealed cavities and called for a change to the Building Regulations.

At the time of writing, it's a worrying statement that just two of the 197 private residential buildings in England more than 18m tall with ACM cladding and only seven private blocks have been fully repaired.

In some cases, the buildings that require updating, find themselves in somewhat of a legal and moral responsibility grey area. This is due in the main to legal disputes between freeholders, often an investment or pension fund, and leaseholders to establish who has the responsibility to pay the cladding replacement bills that on some blocks are estimated at £40 million.

It's vital as a property owner for the safety of residents and visitors, as well as the value of the property and possible re-sale, owners fully understand where they stand, both morally and legally. The following will provide some insight based on some recent cases.

external cladding inside insight

How might ACM cladding affect a property portfolio?

One recent case in Manchester highlighted the issues faced by freeholders, fund managers and property managers. Leaseholders of two high-rise apartment blocks successfully challenged bills amounting to around £20,000 each for the replacement of the ACM cladding system. The building owners will now have to pay an estimated £5 million, plus legal costs and the costs for a 24-hour walking watch until the full replacement of the cladding. This judgement saw a previous property tribunal ruling overturned. *

*ref https://www.theguardian.com/uk-news/2019/mar/01/flat-owners-win-battle-combustible-cladding-manchester

This case highlights the exposure property portfolio owners and managers may ultimately face. Former Housing Minister, James Brokenshire warned freeholders to take action now, before new legislation and legal cases by local authorities and leaseholders drive up costs.

Although the inappropriate use of ACM cladding was the driving force behind the new legislation and has been the focus of the debate, other forms of cladding and combustible materials have come under the spotlight and are part of the legislation changes.

For reference, you can access further guidance at https://www.gov.uk/guidance/building-safety-programme.

The Ministry of Housing, Communities and Local Government (MHCLG) has established the Building Safety Programme to make sure that residents of high-rise buildings are "safe - and feel safe - now, and in the future." Although primarily aimed at residential buildings over 18 metres, changes in legislation also include hotels which now present those particular owners with many new challenges - mainly who foots the bill?

Although some leaseholders have successfully sued freeholders, many leaseholders have paid bills presented by owners. Still, hotel property portfolios do not have this luxury unless they can leverage payments from hotel management companies within lease agreements.

A new industry-wide process agreed for valuation of high-rise buildings.

The Royal Institution of Chartered Surveyors (RICS), The Building Societies Association (BSA), and UK Finance have agreed on a new industry-wide valuation process which will help leaseholders sell homes and re-mortgage in buildings above 18 metres (six storeys).

Responsible companies within the industry, like ourselves, are also encouraging the owners of these buildings to proactively pursue independent testing of external wall materials to speed up the process for buyers and sellers safely. Valuers, lenders, building owners, insurers and fire safety experts will use the new method in the valuation of high-rise properties, with actual or potential combustible materials to external wall systems and balconies.

The new External Wall Fire Review - https://www.ukfinance.org.uk/policy-and-guidance/reports-publications/external-wall-fire-review, will require a fire safety assessment to be conducted by a suitably qualified professional, to deliver assurance for lenders, valuers, residents, buyers and sellers. Only one assessment will be required for each building, and this will be valid for five years.

Will your property fall victim to zero-value rating?

With a wide range of stakeholders getting behind the External Wall Fire Review, property portfolio owners and managers with properties which do not meet legislation may find it increasingly difficult to:

  • Find and secure funding
  • Adequately insure the property
  • Find leaseholders for apartments
  • Sell on the property

Properties with cladding systems have to provide a BR 135 fire safety certificate or face the prospect of having a zero-value placed on the property. With some 20,000 privately owned properties across the UK clad in the same combustible material named as a key factor in the spread of fire at Grenfell Tower, this has alarm bells ringing across the property community. Safety, of course, must be a paramount driver in future decisions, along with considering the prospect of a property that offers no future sales value or development opportunity.

There is also the added risk of litigation from existing leaseholders and local authorities who use new powers to enforce upgrades in line with the new legislation. *

*ref: https://www.rics.org/uk/news-insight/latest-news/fire-safety/new-industry-wide-process-agreed-for-valuation-of-high-rise-buildings/

Cladding - a broader review

A recent fire at student accommodation in Bolton (The Cube) has brought new media coverage concerns around other cladding materials. High-pressure laminate (HPL), used extensively in similar buildings may be subject to legislation, after Government testing which is due to be completed by March 2020.

The high-rise of student accommodation

With student accommodation prices ranging from £125 per week to over £700 per week in some prestige London blocks, the race for property developers to find land, build and finish student accommodation has seen a considerable rise over the last five years. The industry has seen concerns raised around the number of student accommodation buildings which still have either Grenfell style ACM cladding or other potentially combustible cladding systems.

The challenge for commercial property portfolios is maintaining and increasing the value while limiting additional costs. Changes in regulations and legislation may force a rethink on how some developers perceive cladding, changing from an aesthetic finish to a value-added, sustainable and safe property solution.

Cladding is not inherently dangerous. Designing and installing the right type of cladding system, that conforms to regulations - the core material in the cladding must be of limited combustibility (this includes materials of Class A2-s3, d2 or better to meet BS EN 13501-1) - is vital to the future success of the product and properties. Legislation and fire certification are continually updated to fall into line with regulations.

There is no doubt within the industry, property portfolio owners and property developers that the right cladding product, well designed, installed and executed by professionals is still one of the most exciting and sustainable developments in the property sector for years.

The key is these developments is management by professional organisations, working to legislation, with the best interests of the property owner, residents and the wider public at the core.

Funding Potential

Although coronavirus (COVID-19) is rightly taking front stage globally just now, people and organisations are considering the safety of their properties and their options. On the 11th May 2020, Chancellor of the exchequer Rishi Sunak allocated more money in his 2020 budget for the removal of unsafe cladding from high-rise buildings in England.

A new Building Safety Fund is being established worth £1bn of government money in a bid to ensure that unsafe cladding is removed from all private and social housing above 18 metres in height.

You can read the full article by visiting: https://www.theconstructionindex.co.uk/news/view/budget-1bn-fund-for-cladding-removal

For all your cladding advice, design and planning requirements, Starfish Construction is the right choice.

As an industry respected, legislative and accredited partner, Starfish Construction is ideally placed to support you and your property cladding requirements. Our projects have all benefited from our industry expertise, technical knowledge and management processes.

Our approach to Diagnose, Design and Deliver solutions for our clients, delivers an end-to-end support from survey through to installation, meaning we guide you by providing the facts to make informed decisions. At every step, you can take confidence that our consultancy and reporting services deliver a collaborative relationship. Our clients benefit from our diverse skillsets, and we continually define how cladding projects should be executed across all our projects.

Additionally, our roofing and internal fit-out divisions provide the full building envelope solutions to ensure your properties are safe and effective.

To discuss your property requirements, contact our team on 0333 016 5399.