The story below has previously impacted me personally. I used to live in a flat that was in a building with cladding issues. What that meant back in the days – I couldn’t sell my flat to move to a different place.
My story got resolved long before the rules regarding cladding impacted building have changed. I was lucky in a way at the time and got an escape out of jail card.
While many have been stuck with their unsafe properties with no way to sell or remortgage their flats. This has recently changed. These are good news in my view. There are some other points that still need to be clarified before the picture is fully clear.
why were building with cladding impacted?
Most of you will remember the events that shocked the UK in the summer 2017. I am speaking about the Grenfell Tower fire in London.
This has shocked the UK and made a lasting impact on many others. People across the UK who lived in blocks of flats discovered the impact of unsafe cladding.
As most blocks of flats were investigated for the types of materials used in the building process – many people learned that the materials used around the place they called home were actually unsafe.
The cladding resulted in many people finding themselves in a prison like situation. They own their property and are paying a mortgage yet they can’t do anything with the property. The situation was that people weren’t able to sell their property or remortgage it.
The issue with cladding wasn’t simple at all. In order to fix the cladding problem – some leaseholders would be required to splash out up to £100,000 in order to get their property good once again. And as you can imagine – all of the neighbours would have to do the same thing at the exact moment in time.
Due to the high cost and uncertainty – all banks have pulled out the lending against these type of properties. This has fundamentally made many of these properties valueless.
The worst part of this all – people still had to pay mortgage in order to stay in a property that in principle had no value. But this has now changed….
what has changed?
It has taken more than 5 years to arrive to the conclusion – the leaseholders are not to be held responsible. This is an absolute nonsense scenario to even imagine.
The government and its relevant bodies create rules and legislations for building companies to go by. Yet when the issues happens – it was the leaseholders who were previously held responsible for paying the bill for the mess.
The fact that the owner of the property is no longer liable for the cost of this issue – made high street banks interested in lending once again. This makes sense due to the fact that the bank would be the owner of the property in case you default on your payments.
This will be a welcome bit of news by many. I know people who were looking to sell and move for many years now. This will give them an option once again.
One of the issues is the timing – the property market is currently not in its best shape due to high interest rates and reduction in the number of transactions happening.
The only thing to keep in mind with the above news – the banks will consider lending against your property only if you are able to prove that there is an agreement in place on how the cladding issue will be resolved.
The last thing the lender wants – getting a property onto their books that has no cladding solution in place.
few points to know about cladding impacted properties going forward
While the above news will be very welcome by many – there are some points to be aware off. The biggest issue in my view – there is no clear guidance to the lenders on how to value these properties currently.
My biggest fear would be that these properties are significantly devalued. This could put many owners into negative equity. This is a process where the value of the property drops below the actual mortgage that sits against the property. The result – the owner of the property owns bank more than what the property can sell for.
Next, I am currently not sure on how the market will react to the properties with unsafe cladding. Even though there might be an agreement in principle of how and when this would be resolved.
Think for yourself – if you were looking to buy yourself a new home and had a set budget. There are 2 properties on the market that you like. Both are identical. The only difference being – one has cladding issues while the other one doesn’t.
If the price of both of these properties was the same – which one would you pick? I personally would go for the safer one. The only way I would even consider the property with cladding issues – if I was offered a significant discount to make the deal worth the issues.
In my personal view – this will be a significant blow to the sellers and the value they will expect to get out of their homes.
summary
The above in my personal view is definitely a great set of news. This will definitely be welcome by many who are currently trapped in their flats.
If this sounds like you I would suggest start looking into the following. Review your options and decide on what you want to do next. Remortgaging could be a logical option in order to save yourself money while you are deciding on the following steps.
Look into prices of similar properties and try to understand if your personal budget makes it affordable to move to a different place. Zoopla is place I would start with in order to get a rough idea of the prices and conditions of the market.
Have a chat with your local estate agent and make a call if selling and moving on is the right thing for you to do at this point in time.
One thing to keep in mind – what will the reality of valuation of properties impacted by cladding will look like. This can swing the affordability of a new place significantly.