Sector assesses full impact of expelled Tri Fire engineer on loan securities

‘Widespread ramifications’

 

Marc Burns, director and co-head of affordable housing loan security valuation at JLL, said: “We haven’t got absolute numbers, but we’ve heard anecdotally that about 3,000 blocks have been signed off by Tri Fire in both the private and social sectors.”

 

“Now, of course, not all of those blocks will be used as security against loans. We’re very much in a holding pattern situation at the moment where we are information-gathering.

 

“So, we are reviewing our valuations, and we are speaking to borrowers to understand how many blocks were signed by Tri Fire, and we have been contacted by lenders conducting their own internal investigations into this. We are waiting for the outcome of those investigations from the lenders, and we’ll wait for their instructions on the next steps.

 

“Lenders are very much information-gathering and considering the next steps internally and affected RPs [registered providers] are speaking to their lenders on this matter as well.”

 

Mr Burns added that JLL will be due to revalue portfolios that may include blocks with Tri Fire EWS1 forms issued in the coming months.

 

Richard Petty, head of residential valuation at JLL, said he understands that Tri Fire has issued several hundred EWS1s in the sector.

 

“We have found over 500 [Tri Fire] forms so far in our own files for buildings valued over the last five years for charging purposes, but that is not to say we have identified every single one,” he said.

 

“I think it would be very helpful for the IFE to confirm how many EWS1s Tri Fire has issued and how many of those were not properly signed off or issued. We want to know how big the box of apples is, and we need to know how many are wrong.”

 

Charlotte Ingram, associate at Devonshires, said that the law firm is working with a “significant” number of housing association clients affected by the issue of Tri Fire-issued EWS1 forms for properties used for loan security.

 

“At the moment, it’s very much a case of working collaboratively with our clients and the lenders, who are still assessing the extent of the issue and how widespread it is [in terms of how many certificates Tri Fire has issued in respect of the number of properties],” she said.

 

Susie Rogers, security charging partner and head of portfolio transactions at Capsticks, said the “ramifications of the suspension of Adam Kiziak by the IFE have been widespread in the social housing sector”.

 

She added that several RPs, which are generally London-based, are “dealing with the fall-out”. 

 

Ms Rogers said Capsticks is aware of several funders that are reluctant to lend against buildings with EWS1s provided by Tri Fire and this is causing problems for RPs and for residents living in those blocks.

 

“It is adversely impacting the buying and selling of those properties – but the repercussions are further reaching than that,” she said. 

 

“At present, we are seeing an impact on new security charging of property portfolios because EWS1s from Tri Fire are unlikely to be accepted.

 

“This, in turn, might make it increasingly difficult to charge those properties at this point in time.” 

 

Ruby Giblin, partner at Winckworth Sherwood, said that she was working on a tranche of a private placement for a recently completed deal, in which two per cent of the stock portfolio charged as loan securities were affected by Tri Fire EWS1 fire safety assessments.

 

She said that an EWS1 is required by the funders as a condition precedent, which is one of the conditions that must be satisfied before a loan can be made.

 

“Even though they are concrete buildings unlikely to have building safety issues, they have been given nil value, until new EWS1 certificates can be issued, but there are very few fire engineers qualified to issue them, so it could be a while,” Ms Giblin said.

 

“They could substitute new properties, but in this instance, there is no time.”

Investigating the full impact and working with lenders

 

Social Housing understands that lenders are working with housing associations to understand the degree of exposure. For some housing providers this will not be a big issue at all, whereas others may have pockets of properties that were assessed by Tri Fire.

 

Where landlords are affected, there will be a conversation with their lender to find a solution.

 

Mr Petty said that for affected loan securities, once lenders have identified how many buildings they have got in charge with how many different customers who have EWS1s given by Tri Fire, they have three options.

 

Lenders could wait for the existing EWS1 form to be replaced, as these are replaced every five years, and accept the current loan security, he said. No one would now accept a Tri Fire EWS1 form for new loan securities, he added.

 

Another option is funders declaring the security as nil until there is a replacement certificate.

 

“We have not seen anybody reach that decision yet, but it’s possible that they will,” Mr Petty said.

 

Mr Petty added that the third and “most extreme option” is to ask for a replacement security straight away because those existing buildings are no longer acceptable as security because of the EWS1s by Tri Fire.

 

He said replacement security, if it is available, is “probably going to be the quicker but more expensive solution” than obtaining a new certificate.

 

Mr Petty said that how quickly a landlord can replace an EWS1 will depend on the supply of fire engineers in the market and because there aren’t many, it could take weeks or months to get a new certificate.

 

“We haven’t seen any bank yet come down [publicly] on which of those three options it will take; there are clearly implications for security and for cost and for disruption in the market,” he said.

 

“But what we’re trying to do when we give an opinion of the value is to say what we think the portfolio of assets would sell for today, and the markets at large would not react well to an EWS1 given by Tri Fire.

 

“So, I think you probably would find it difficult to sell a building with a Tri Fire EWS1 at the moment, in which case, I think the most sensible option is probably giving a nil value to those buildings until you’ve got better and further information and get those certificates replaced by another provider as quickly as possible.”

 

Mr Petty said he believes “we will start to see some problems emerging in the coming weeks”, depending on how individual banks decide to deal with the matter.

 

“I think generally from our conversations with lenders and other stakeholders, there’s a general desire to be pragmatic here and to keep the market moving and to deal with each case on its merits, rather than start to panic or have a blanket response to anything,” he said.

 

Capsticks’ Ms Rogers said that for properties already in charge, RPs, valuers, funders and solicitors are working together to assess the impact and find a way forward. 

 

“It is vital that RPs work closely with their investors and valuers before the portfolios come up for re-valuation, in case additional security is required because valuations are adversely affected,” she said.    

 

“We work with several RPs who have cut ties with Tri Fire and who are working collaboratively with valuers and lenders to minimise the impact – including for residents. 

 

“RPs are proactively seeking to get buildings re-certified as quickly as possible, but the scarcity of qualified fire safety engineers is impacting timescales, including where remediation works are required as those works specifications might need to be re-assessed. 

 

“The situation is also putting an additional burden on valuers and, although the sector’s valuation firms are rising admirably to the challenge, RPs do need to be mindful of timescales.”

 

Ms Rogers said the situation is proving “challenging” for RPs, particularly if they are operating under threat of a remediation order under the Building Safety Act 2022.

 

Remediation orders under the act ensure that essential remediation work required to remedy relevant defects takes place without delay. Regulatory bodies and leaseholders can apply to the First-Tier Tribunal for a remediation order to compel a relevant landlord to remedy relevant defects by a specified time.

 

“In our experience, RPs are actively looking to remedy the position and are keen to support individual residents wherever they can, for example allowing shared owners to sub-let affected properties in certain circumstances,” Ms Rogers said.

 

Trade bodies

 

Victoria Moffett, head of building and fire safety programmes at the National Housing Federation (NHF), said that housing associations are working to identify where they need to review any work carried out by Adam Kiziak and Tri Fire.

 

She added that the NHF is “working closely” with its members to understand the full scale and impact of this evolving situation on them and their residents.

 

“Housing associations are doing all they can to minimise the impact of this issue on their residents and ensure any issues regarding EWS1 forms are resolved as quickly as possible,” Ms Moffett said. “We would urge any leaseholders affected to speak to their mortgage provider and their landlord.”

 

Fiona Fletcher-Smith, chair of the G15 and group chief executive at L&Q, said that Tri Fire is “one of the largest” building safety inspectors in the country, and has therefore provided services to “several members of the G15”.

 

“We’re very sorry for the impact that [Tri Fire’s] alleged actions [are] having on residents, in particular those who have had the sale of their homes interrupted,” she said.

 

“Our priority is putting measures in place as quickly as possible to reassure residents about the safety of their homes, and our members are focused on their individual plans to do this.” 

 

A spokesperson from UK Finance, a trade body for the UK banking and financial services sector, said that it is engaging with the IFE and other industry bodies on the implications of Mr Kiziak’s expulsion for fire risk assessments and related EWS1 forms he has provided.

 

“Until there is clarity on next steps for the IFE and building owners as clients of the expelled fire engineer, mortgage lenders will make their own decision on whether they accept EWS1 forms completed by Mr Kiziak,” a spokesperson said.

 

“Anyone concerned about their property’s safety should speak to their building managing agent or building owner.”

 

In its latest statement online, the IFE said that it shares the concerns around the activities undertaken by Mr Kiziak, and that following a thorough investigation and in accordance with its disciplinary process, “he has rightly been expelled from the Institution of Fire Engineers (IFE) and his membership status has been revoked”.

 

“We have followed the appropriate processes throughout this case and have investigated all actionable complaints in a timely manner,” the IFE said in the statement.

 

“When complaints are made, we review these to consider the initial evidence and subsequently conduct a comprehensive investigation to arrive at just and proportionate findings. In this case, the findings resulted in Mr Kiziak’s suspension from the IFE and, ultimately, his expulsion.

 

“Throughout the formal disciplinary process, we have worked closely with relevant partners including the Ministry of Housing, Communities and Local Government, the Royal Institution of Chartered Surveyors [RICS], the Engineering Council, Institute of Fire Safety Managers and the National Housing Federation.

 

“An expulsion is the strongest sanction we are able to enforce on members who violate our code of conduct. Like many other professional bodies, we do not have powers of redress or access to further sanctions.

 

“We do, however, recognise that there are building owners and leaseholders looking for answers and solutions. We strongly urge Tri Fire to promptly engage in a dialogue to resolve any outstanding concerns.”

 

The IFE also pointed to its FAQs page on the investigation and its outcome.

 

Within this, the IFE said it is “not responsible for keeping and [does] not keep a register of all buildings inspected, or of any other work undertaken, by individual members of the IFE”.

 

“It is also important to note that Mr Kiziak’s expulsion does not automatically invalidate his historic assessments,” the professional body said online.

 

“Buildings that were inspected will name Mr Kiziak and/or Tri Fire. Owners or leaseholders who would like further reassurance should contact Tri Fire directly, or appoint another assessor for a second opinion.”

 

Social Housing asked the IFE and RICS about the reported shortage of fire engineers qualified to provide new EWS1s.

 

Gary Strong, head of professional practice, building at RICS, said: “Training interventions made by RICS to significantly increase the number of RICS members and other professional body members including IFE members who can carry out FRAEWs [fire risk appraisal of external walls] and EWS1 forms for low and medium-rise buildings up to 18 metres will ease the difficulties that building owners might find themselves in with having to seek professional advice.”

 

Mr Strong pointed to further information available on RICS’s website on EWS1 forms, as well as RICS’s list of course completers.