The UK government has recently announced that three high street lenders, Virgin Money, TSB and Skipton Building Society, have joined the commitment to offer mortgages on properties affected by building safety issues. The move was announced on the UK Gov press site here and you can read it in full here.
The three lenders will now consider mortgage applications for properties in buildings that are yet to be remediated, or where leaseholders are protected from remediation costs. This gives those looking to buy, sell and remortgage more choice, allowing people to get on with their lives. It will come as a relief to many trapped in high rise apartment blocks, which have yet to have their cladding replaced. It still doesn’t really bring closure to thousands of people unable to move house until a legal dispute regarding the costs of replacement cladding is resolved, plus the remedial work carried out.
Minister for Building Safety, Lee Rowley, said:
I am extremely pleased to see three new lenders doing the right thing and supporting leaseholders who are stuck in homes with building safety defects. This is a further sign of the market’s confidence in the solutions that we have put in place to protect leaseholders. From today, customers impacted by building safety issues will have more choice when looking to buy or re-mortgage. I would encourage more banks and building societies to join the commitment made by Virgin Money, TSB and Skipton.
Stock image.
LEASEHOLDER PROBLEM, INSURANCE PROBLEM
This latest announcement highlights the problem at the heart of the leaseholder system; people think they own a house or apartment, but in reality, the leaseholder owns the land, and sometimes the immediate 1-10 feet of land around the property as well, or the actual apartment block that individual flats are contained within. Therefore the leaseholder has a legal liability, as well as collecting ground rent for up to 999 years. It’s a semi-feudal system, where responsibility for repairs and problem solving is essentially a game of pass the parcel. Sadly, UK governments over the last 50 years have failed to do anything constructive about reforming it.
COMPO FOR APARTMENT OWNERS?
Is there any hope of compensation for apartment buyers, who are faced with losing serious money when they sell up and move on? In a word, no.
The current government did pass a Building Safety Act. In this legislation the government tried to pass the costs of remedial works onto the builders/developers who carried out the original work. But that will just prompt a wave of bankruptcies and receiverships, so owners of apartments or blocks will go back to their insurers. The legal arguments will continue for years, possibly decades and it’s fair to say that local authorities who signed off on cladding schemes also have a potential liability. But again, proving that in court will be long-winded and costly for the claimants.
If you want to see just how long proceedings can go on for, with claims and counter-claims being taken to court, then read some case summaries here. Building firms are suing each other, even Councils are suing companies they hired to carry out remedial works, presumably after a due diligence and open bid process for the work itself. It’s depressing reading.
In general, insurers can argue that all existing legislation on safety and materials used was met, checked and signed off when the apartment blocks were constructed. In theory there’s no claim as regards replacing materials at the insurer’s expense, since nobody can accurately predict future building regulations. But that won’t stop lawsuits and arguments for many years ahead. In the same way that sub-postmasters/mistresses had to fight for decades against Fujitsu over false accusations of theft, the “little people” who actually bought a flat thinking it was an investment as well as a home, will be the financially ruined, stressed-out losers.
It’s a mess which any incoming Labour or Coalition SNP-Labour government will strenuously avoid dealing with. Of that, you can be certain.
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