UK leaseholders who are eager to move but unable to sell or remortgage their flats because of cladding issues are accepting bids from cash investors, often for tens of thousands of pounds less than the properties’ most recent market value.
Since the Grenfell Tower tragedy, in which 72 people died in a blaze that was spread by flammable aluminium composite material — or ACM — cladding, the government has issued new guidelines encouraging building owners to take “general fire precautions” and ensure their structures are clad in material with limited combustibility.
But the advisory notice, released in December 2018, has had the unintended consequence of drastically reducing the valuations of flats in buildings that have yet to be declared safe. Many of these properties have been valued at zero by lenders, stopping thousands of sales and forcing owners who urgently need to sell to consider cash offers far below what their homes are worth.
“The people buying are what I’d call predatory investors,” says Mark Hayward, chief executive of NAEA Propertymark, a professional body for estate agents. “Basically they’ll apply as big a discount as they can by capitalising on the stress of the existing occupant.”
Up to 17,000 households still live in privately owned blocks with similar cladding to the Grenfell Tower. According to the English Housing Survey, there are 266,000 households living in privately owned flats in buildings that are at least 18 metres high, hundreds of which have yet to be checked for other types of dangerous cladding.
Ben Orford, a sales manager from Manchester, failed to find a bank willing to lend against his ACM-clad property, so eventually sold his two-bedroom flat to the COO of a large UK company in cash for £20,000 less than it had been valued earlier in the year.
Just down the road, in Castlefield, a three-bedroom apartment in a building coated in timber-cladding is being advertised on Rightmove to “cash buyers only” for £70,000 less than the original asking price. Buildings with wood in their wall systems were also covered by the government’s cladding advisory.
According to the estate agent marketing properties in the same building, most of the interest is coming from “overseas cash investors who are willing to inherit the risk” of having to pay for future remedial works to make the building safe — assuming the developer does not pay themselves.
None of the cash investors contacted responded to a request for comment.
As well as living in potentially unsafe buildings, occupants of buildings that have not been given the all-clear face soaring service charge bills to pay for 24-hour watch patrols and — if their building is found to have combustible cladding different to the ACM that coated Grenfell Tower — no guarantee that the building owners, or the government, will foot the bill for expensive remedial works.
In a survey of leaseholders from 117 housing developments this month by the Leasehold Knowledge Partnership, a charity that supports leaseholders, 90 per cent of respondents said the government’s response to the ‘cladding crisis’ had been “no help at all.”
In December last year, the Royal Institution of Chartered Surveyors, The Building Societies Association and UK Finance, which represents lenders, announced an industry-wide valuation process to help people whose homes had yet to be declared safe so they could begin to buy and sell their properties, but a shortage of qualified fire engineers to conduct safety assessments means long waiting lists, while some mortgage providers are rejecting the form entirely.
Estate agents dependent on sales of new-build apartments are also under pressure over the issue, as prospective buyers wait to see whether the costs of future remedial works fall on the government, developers, freeholders or leaseholders.
Jennie Platt, managing director at City Centre Chic, an estate agent in Manchester, said: “I’d say 80 per cent of our sales have been knocked out.”