Mortgage prisoner: ‘I’ve been told I can’t sell for years’

High-rise flat owners are effectively being told they may not be able to sell up or remortgage for several years unless the new government steps in to sort out a safety row.

Those affected could include Jack McGurran, who was looking to sell his flat so he could buy a bigger place, but now probably won’t be going anywhere for a while.

McGurran is one of up to an estimated 600,000 people in England living in “unsellable” flats because they have been caught up in the fallout from the Grenfell Tower disaster.

They have been dubbed “mortgage prisoners”, and it had been suggested they could be stuck for perhaps six to 12 months or so. But some flat owners are now being warned that without official intervention, it could be a lot longer than that.

Shortly before Christmas, some potential good news did emerge which could help break the logjam. This may mean that things aren’t quite as bleak for McGurran as they had initially seemed, though we are yet to see how this all pans out.

High-rise flat dwellers have become caught up in the confusion over cladding on tower blocks – specifically, whether or not buildings meet new fire safety standards introduced following the Grenfell fire, how much it will cost to put any problems right, and who will ultimately foot the bill.

During the past few months, many mortgage lenders and property valuers have toughened up their policies relating to tower blocks after the government issued what’s known as “advice note 14” relating to cladding in December 2018. For example, Santander updated its lending policy on buildings with cladding in May, while Barclays’ revised policy took effect in June.

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McGurran, 31, lives with his fiancee in the 10-storey Azure building in Stratford, east London, and wrote to housing association L&Q to ask whether there would be any issues relating to selling his home.

He had been alarmed to hear the experience of his stepbrother Jerome Cox, who lives in a Peabody housing association shared ownership flat in Hackney, north London. Cox was trying to sell his property, but the prospective buyer had been unable to obtain a mortgage on it, leaving Cox feeling trapped.

Azure Building in Stratford

The Azure building (right) is covered by ‘advice note 14’ issued by the government after the Grenfell fire. Photograph: Alicia Canter/The Guardian

L&Q, which is one of Britain’s largest housing associations and developers, wrote back at the end of last month with bad news. “Unfortunately, in the short-term at least,” the letter said, building owners including L&Q could not provide the documentation that some lenders were requesting. Lenders want applicants to provide independent evidence that a flat meets the requirements of advice note 14.

To obtain this, building owners had to employ a specialist fire engineer to carry out “intrusive” tests of the building structure, L&Q said, adding: “Doing this involves ‘opening up’ the building and testing all the materials used in its construction to make sure they meet the new standards.”

If this process can be completed conclusively, the results then need to be analysed and any resulting work planned and carried out before the correct evidence can be provided. This is a complex and lengthy process.”

L&Q – which houses about 250,000 people in more than 95,000 homes, mainly in London and the south-east – said most housing associations predicted the majority of buildings would need some remedial work.

Then came perhaps the biggest blow: “With this in mind, buildings must be prioritised based on risk, and we expect our programme to take several years to deliver.”

The letter went on to apologise for the “unfortunate position” this left McGurran in, but said it was something that was “beyond our control”.

And, in a follow-up letter dated 12 December, L&Q said: “In the meantime, I’m afraid my advice to you would be not to go ahead with trying to sell your home until the issue is resolved.”

McGurran, who has a one-bedroom shared ownership flat in the building, says: “The surprising aspect is how matter-of-fact they were in effectively saying ‘tough’, and that it’s up to the government to fix this.”

He adds: “We have no options.” He and his fiancee had been hoping to sell in the next few months, but that’s now on hold. And if he wanted to get a job in another city, he couldn’t do that, as he is not allowed to sublet the flat, he says.

McGurran has not put his property on the market, but if he had, he may well have found that the valuation came back as “zero”. He says: “I made an investment in good faith, and to find out that effectively my investment is worth nothing – that is quite worrying.”

Thousands of people living in high-rise (defined as more than 18 metres tall) apartment blocks, as well as many living in smaller blocks, are affected by this, because valuers are taking the view that unless they have all the facts at their fingertips – for example, is there any chance a leaseholder could be hit with a cripplingly large bill for remedial work? – they can’t put a valuation on the property. That means these owners can’t sell up or switch to a cheaper mortgage.

However, there is some good news: a few days after the general election, it was announced that a new industry-wide process – to be used by valuers, lenders, building owners and fire safety experts – had been agreed for the valuation of high-rise properties. In theory, the move agreed by the Royal Institution of Chartered Surveyors (Rics) and others should help unclog this part of the property market, but the proof of the pudding will be what happens over the coming weeks and months.

There might also be some positive tidings for McGurran. L&Q told Guardian Money that it manages several shared ownership homes within the Azure building, and that responsibility for providing the information which many mortgage lenders are asking for lies with the freeholder, Telford Homes. It says that due to an administration error, it did not refer residents to Telford Homes in the first instance. “Since then, we have secured confirmation from the freeholder that the Azure Building, which is largely a brick structure, meets government requirements and contains no ACM [aluminium composite material] cladding. We hope this information will be sufficient for mortgage lenders and are liaising with the freeholder about getting this report to residents.”

L&Q is a member of the G15, a group of London’s largest housing associations. G15 chair Helen Evans told us: “This is a situation affecting thousands of leaseholders up and down the country and should be high on the new government’s agenda. We are calling on them to help unstick this process, provide urgently needed clarity to their confusing guidance, and explore funding as costs associated with building safety will otherwise leave many leaseholders with unaffordable bills and reduce the capacity of housing associations to build new affordable homes.”

Peabody told us it sympathises with Jerome Cox and adds that the industry “desperately needs” the government to step in on this issue.

What the big mortgage lenders are saying

Nationwide says that, like other lenders, it requires a valuer acting for it to get confirmation from an expert that the property is safe and meets the requirements of advice note 14. It adds: “The industry is working on an external wall form which will make it easier for a valuer to understand the output of the fire reports and for them to understand what works need doing, which will help them value the property.”

Santander told us it considers a range of factors before deciding whether to lend including, on some high-rise buildings, whether the safety of the construction materials used meets government guidelines.

The Lloyds group, which includes Halifax, says it is working closely with the industry on this “complex issue”. It says the advice of its valuation and conveyancing service providers is considered on lending applications to ensure the relevant official guidelines are met, adding: “We review such applications to help support customers’ individual circumstances.”


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