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UK Financiers Loosen Restrictions on Cladding Requirements

Written by Joshua Riffkin

Early this month, UK Finance and the Building Societies Association (BSA) announced that several of the UK’s leading lenders (Barclays, HSBC, Lloyds, Nationwide, NatWest, and Santander) would now lend on blocks that had received a rating on their EWS1 (External Wall Survey 1) of A3 or B2 so long as firm remediation plans were in place with full funding and set dates.

What does this mean?

A B2 rating means that the external wall of a block contains combustible materials. A3 is given when combustible attachments to the walls are present and would need to be removed (wooden balconies for example). Prior to this announcement, banks would not lend on such blocks, or on any unit within such blocks, until the problem was fully remedied.

This has been a cause of major frustration within the industry, slowing down many major developments/redevelopments of existing blocks, trapping leaseholder capital by preventing refinances, slowing down the sales chain by preventing mortgages of flats within such blocks, and could sometimes even cause cladding issues to continue to go unremedied as developers look to free up previously locked-in cash elsewhere to pay for their remediations.

This sticky protocol has been a sour point for many for quite a while now as developers have either had to put other large housing projects on hold in order to remedy issues that they had previously been told were up to regulation standards, and preventing many leaseholders from reaping any benefits from the increase in value of their most valuable assets.

This bold new move however has allowed the process of remediation to kick up a notch, has freed up millions in investor and leaseholder capital, and, as a result, has sped up the process of UK housing delivery as a whole.