Cladding- 16th October 2020
Cladding at Century Wharf
Update for Leaseholders – 16th October 2020
There has been a lot of information recently about cladding and a number of leaseholders who wish to sell their apartments have got caught up in what can only be described as a state of limbo. The RTM has put out a couple of updates on this matter and mentioned it in the Annual Report to RTM members. This update which is prepared by RTM Directors, with input from our on-site Warwick Estates Development Manager, Owein Mattey, is specifically to address some national and local publicity and try to provide information and some re-assurance based on facts, rather than speculation.
Government Advice Post Grenfell
Following the tragic events at Grenfell, the Government has been developing and changing its advice, sometimes in consultation with the industry and other times, without notice. This has had a profound effect on high rise apartment blocks. Initially, the Government advice was that any building over 18m high required some documentation to say it did not have any of the ACM cladding that covered Grenfell. We were lucky at Century Wharf that we didn’t have any clad buildings, unlike some others in Cardiff Bay. We received confirmation that our buildings were ok from that perspective. Sales and purchases were unaffected.
Concerns then began to be focused on other types of ‘combustible material’ that might be on the external walls of high rise buildings. The government worked with RICS and Lenders to come up with an EWS1 certification system for buildings over 18m. The External Wall Survey system would give comfort to lenders and leaseholders that no other material was a risk on the buildings. Only a few of our buildings are over 18m. The vast majority are below this height. And none have cladding.
A cursory examination of our buildings shows that they are mainly brick built, but all do have some wooden balconies or wooden decking on the balconies. Others have some wood at eves level and one or two have some wood detailing. Some of the buildings also have material at soffit level which we are informed is now regarded as below the new standards.
Then, without warning, in January this year, the Government suddenly changed their advice and included all buildings, not just those over 18m. We immediately started receiving emails and calls from leaseholders who were trying to sell, saying that valuers acting for lenders were returning valuations of NIL. This did not mean the apartments were worthless, merely that the surveyor was unable to provide a valuation because they did not have sufficient information on material on the building. As you can imagine, leaseholders in this position were very anxious.
The RTM took advice from Warwick Estates and they recommended two companies out of only five in the UK at the time who we were told were able to undertake the EWS1 surveys, to provide quotations for the necessary work. We were very concerned when the first company asked for £350,000 just to undertake a survey. To put this into perspective, it would have been £386 for each leaseholder! And, we knew from conversations with them that ALL buildings at Century Wharf would fail, as all had some wood somewhere on them or other ‘combustible’ material. Having failed, we would then be hit with a schedule of works, which we were informed could be as much as £4million to remove everything now considered ‘combustible’ and replace with material now deemed ‘non-combustible’.
The second company recommended, SFI, also quoted but at a much lower cost and in a different way. They quoted per building and a mixture of insurance related cost for certificates and a relatively low survey cost. We were even able to negotiate that cost down given that Houses were not individual buildings for insurance purposes (eg Hansen Court was only one building, not five buildings). Their quote was initially around £100,000, but reduced to around £65,000. In a walk around with them, they pointed out wood and other combustible material from an initial visual inspection.
SFI were commissioned to undertake the work. We were still aware that all buildings would be likely to fail, but we were also aware that lenders were looking for details of what was on our buildings, what might need to be removed/replaced and that an undertaking from the RTM to do that work might have been sufficient to allow leaseholders to buy and sell again. This was confirmed by leaseholders on site who were mortgage brokers and solicitors.
However, as soon as we received the ‘interim’ EWS1 certificates, two RTM Directors were highly concerned and began making their own enquiries about SFI. On the one hand certificates were signed by someone who we had not met nor were aware of, a Sophie Magee. A cursory search of RICS showed she was RICS registered, but worked for another unrelated company. Whilst of itself perhaps not an issue as companies can work for each other, further enquiries also gave us cause for concern that the insurance cover necessary for such surveys was also not in place. On 7th August, as a result of our enquiries, Warwick Estates were given a written instruction by the RTM not to pay SFI. No payment had been made and no payment will be made to them as a result of our enquiries. A complaint was made to Warwick Estates that their due diligence of the company had not been satisfactory.
Around two dozen leaseholders had been waiting for copies of the EWS1s as they were trying to sell their apartments. Warwick did initially send the SFI certificates out, but subsequently, on our instructions, informed those leaseholders that the certificates should be regarded as invalid.
Some 10 days later a leaseholder got in touch with Warwick alleging fraud. No contact was made with the RTM and we subsequently learned that the leaseholder had also gone to Action Fraud. We have subsequently spoken with Action Fraud and let them know we are happy to provide whatever assistance and evidence anyone needs to investigate the matter. We have also been made aware of conflicting versions of what happened between SFI and the surveyor. That of course is now a matter for RICS and other appropriate authorities to investigate.
We have of course subsequently seen some local publicity about this. That has unfortunately not helped leaseholders who had potential cash buyers lined up for their apartments, as those buyers appear to have pulled out as a result of the publicity.
There has been considerable national coverage of the plight of leaseholders in high rise apartment blocks as a result of the government/lender/RICS approach. We have written to leaseholders on this, attaching some of that coverage (see attached article from just this week). A parliamentary petition has also been started and we have urged leaseholders to sign it. This is the link to that petition https://petition.parliament.uk/petitions/328201.
As more than 10,000 signatures have been received the Government has had to respond. That response can be see via this link https://petition.parliament.uk/petitions/328201?reveal_response=yes
Where We Are Now
We believe that political pressure will continue to build on the UK and Welsh Governments to sort this mess out. We hope that they will clarify what ‘other documents’ will be acceptable for buildings under 18m for lenders’ purposes, so leaseholders can sell again.
In respect of buildings over 18m, we are now taking a far more cautious approach towards any EWS1 certification. We have enlisted the assistance of a leaseholder on site who has experience of the industry and RICS matters. We are also garnering support from leaseholders who are solicitors and others. Our aim is to try to get a schedule of one building, setting out what is required so that it actually passes an EWS1, not just paying for a certificate that tells us it has failed!
With regard to the vast majority of our buildings that are under 18m, we are trying to bottom out whether anything actually will need to be removed or replaced and again what that might cost. Our aim being to minimize expenditure to that absolutely necessary to enable leaseholders to buy and sell. We do not believe we have anything on these buildings that creates any significant risk to residents. No one has highlighted anything to the contrary.
As you will be aware, we have raised the call for reserve funds to enable us to undertake works that may be necessary. Warwick have been trying to push us for years to raise this element of the service charge, but we have resisted. Up to this year, we had collected £350,000 a year towards reserves and spent this sum by way of long term planned maintenance each year, eg decorating, fire alarm upgrading, CCTV upgrading and expansion, fibre replacement, lift repairs etc. The level of reserves for unforeseen emergencies remains as it was when we took over management of the site in 2014, at £1.5million.
We know that any works to remove for example soffits, will be extremely expensive and scaffolding alone will be in excess of reserves held per block. By increasing the call for reserves this year, we hope to have enough to undertake works without having to ask leaseholders for additional sums in year or at year end. We know that this is not popular and we do not want to do it, but it is a prudent way of hopefully smoothing out expenditure. If we do not need to do any work at all to blocks, we will look to reduce or return this reserve to those leaseholders who live in those blocks. In our view, this is unlikely. At best, the works concerned may be much less than we are being told and then what we have collected may be enough to do the work.
Finally, we would ask all leaseholders to think carefully before seeking to sensational matters in the media. It does nothing to help the value of your apartment and we know (as we get the emails), it just worries potential buyers and means leaseholders may find it even harder to sell. Century Wharf has a good reputation in the market. It is we are told regarded as well run, because we, the leaseholders through an RTM, manage it.
We have tried our very best and will continue to hold down service charges. We have avoided and saved hundreds of thousands of £s costs each year by doing a lot of work ourselves, rather than via an Estate Management Company (This has saved £180,000 a year on staff costs and related VAT thereon alone – ie £200 per leaseholder per year). We reduced the day to day costs of running Century Wharf from £2.4m in 2014, to £1.9m. The day to day costs of running Century Wharf today remain under £2m.
We will keep leaseholders updated as this matter develops. We would recommend that leaseholders write to their MPs and MSs to continue the political pressure on Westminster and Cardiff to resolve this situation which is of their making.
Owein Mattey Mark James CBE
Development Manager Chairman
Warwick Estates Century Wharf RTM