EWS1 certification: is B1 likely to be a barrier to selling a flat in future?

[deathbyprocrastination]

I'm selling my mum's flat, and buying one for her nearer to us so that we can help look after her. We're completing on the sale on Friday and the purchase is quite well progressed but we've just received a document as part of the LPE1 pack from the managing agents notifying the current owners of an EWS1 amendment: the flats were originally given A1 status but they have now found some combustible materials and downgraded to B1.

My mother will be a cash buyer after her current flat sale but obviously we need to think about its future sale value for example if she deteriorated rapidly and we needed to move her into residential care and sell her flat to pay for it.

As I understand it, B1 is currently acceptable to mortgage lenders but does anyone in the know have a sense of whether that is likely to change in the future? I'd really appreciate some advice. It's been SUCH a long stressful process getting her moved and I can't bear the thought that we might have to start again looking for a new place.

Thanks in advance for your help with this

Bumping!

Just going to have one more go at bumping this then will give up! Have read a bunch of stuff online but trying to get as many different opinions as poss

I'm not sure what will happen to ratings from a lending point of view but I work in the insurance industry and anything with any type of combustible cladding or insulation is a no go area.
I'd suggest finding out what the freeholder is intending to do with it and what sort of cladding it is?
It's a very difficult area at the moment and everyone is very wary of cladding. I'd also be worried about the potential of selling on as I know a lot of people would be out off.
Good luck

There's also a danger that she'll have to contribute substantially to any remedial works to remove the combustible insulation. If you go ahead, you want to pay FAR less that you would for a property with A1.
Personally, I'd walk away if you haven't exchanged, but if you can get, eg £50k off something that you were going to pay say £175k for, then maybe, just maybe, proceed.
No knowledge of mortgage appetite.

@daisyphase a B1 rating requires no remedial work.

Thanks v much for your responses.

@ElizabethTudor is correct that no remedial work is required because there are v small amounts of combustible material - the outside is mostly tiled

@daisyphase thanks for your thoughts - I'll have a chat with the agent about a price reduction. It's in central London so prices are high £585k for a 2-bed 2-bath - and that was significantly under asking (unsurprisingly given what we now know)

@arthurdaly such a good point re insurance, I will call her insurers now and ask what the cost implications would be

I think you'll struggle with resale value. A lot of people have been scarred by the cladding scandal and will not want to touch anything that's even B1 with a barge pole in the future (my opinion only, I clearly have no evidence for this).

If this was discovered by the vendor before your offer was accepted they may have accepted it because you didnt need a mortgage. The may have realised that the property could have been down valued on a mortgage valuation. I would definitely consider resaleability and you are right to be pausing whilst you research this.

I know nothing of this either - but has she had a survey? Cash buyers obviously don't need one, but on this case it might be prudent to get a surveyors opinion on the value given this.

@titchy - yes, she has had a survey. We didn't know about the downgrade at that point but I did go back to the surveyor after we found out and he did some research and said that we are "one of the lucky ones" because B1 indicates that no remedial works are necessary. The exterior of the building is largely tiled so any combustible materials are in v small quantities.

I've researched mortgage providers (and all of the ones I've looked into are happy to lend where there is an EWS1 with a B1 rating). I've spoken to insurers, a surveyor, read guidance on the conveyancing association website and spoken to our solicitor who is also doing some further research via his trade body. So far, everything I've read indicates that it isn't going to be a big issue but as other posters have said there is of course a risk that anything related to cladding could scare the horses when it comes to selling.

I found out yesterday that the sellers apparently flagged this up at the start and the estate agent forgot to forward the letter to us! So I don't feel I can go back to the sellers at this stage and ask for a reduction.

The thing is, this is the end of a very long road. It has taken so long to find a suitable place for DM within her budget that is near enough to us that i can help look after her. I think she will just be devastated if it falls through so perhaps we just need to go ahead and take the risk that in years to come it may be harder to sell.

I found out yesterday that the sellers apparently flagged this up at the start and the estate agent forgot to forward the letter to us

Shocking.

It sounds like the purchase price reflects the B1 rating. If you do pull out, you may have to pay more for an equivalent flat with an A1 rating. Plus all the hassle, of course.

Can your surveyor estimate the cost of the remedial work? Divide this by the number of flats to get your share of the cost, to get an idea of your financial exposure. Also any increase in the cost of insurance, which will impact the service charge.

Can you ask the managing agent if there are plans to make remedial repairs?

@eightlivesdown no remedial works have been deemed necessary (otherwise it would be B2 rating, or A3, which I understand is also bad news!) so no costs. Insurance is paid by the managing agent as part of the service charge

What you say re price is true I guess in terms of finding another property at the same level but if I’d known about this up front I would have negotiated a bigger discount on the price (we agreed £15k under asking). We are also saving on stamp duty though if we go ahead

It would be useful to know the cost of the work required to move the block from B1 to A1 status, and your flat's share, even if the work isn't currently required. It's a factor for you, and could equally be a factor when you sell the flat. The bigger the cost the bigger the factor (and price discount). But if it's minor works and minor cost, it's less of a concern.

The point on insurance is that if this increases due to B1 vs. A1, you will pay via a higher service charge.

I'd forgotten about the stamp duty saving; worth £15k.

It's unfortunate. A long stressful process finally over, then you discover the agent, perhaps unintentionally, withheld relevant information.

I think you need to try and quantify the scale of the problem. How much work and cost to remedy, even if it's not necessary under the current regulations.

That's helpful advice - thank you @eightlivesdown

B1 means no remedial work is necessary and most lenders are following the RICS guidance at the top level, meaning you SHOULD be able to sell it as mortgageable. However, as you can see above, individual underwriters who work on actual cases may just see 'cladding', ignore their company's policy and the fire engineer report findings and violently throw your application in the bin while having a nervous breakdown.