Industry group forms to solve Advice Note 14 issues

In the absence of this technical detail, lenders are instructing valuers to put a nil value on the properties to ensure it doesn’t go through a credit approval process, with a mortgage advance then being made against a property that the lender potentially doesn’t want to lend against.

This is resulting in multiple new build outright and new build shared ownership sales, as well as remortgaging on existing properties and shared ownership staircasing transactions, being paused until valuers and lenders receive assurances that the buildings comply with the new guidance.

To put that into context, it is estimated that there are 11,500 buildings nationally with external wall systems measuring 18 metres or more in height.

Assuming an average of 50 flats per building, a total of 575,000 flats could be impacted by the problem. With an average of two to three people living in each flat, that could then mean there could be between one and two million residents affected.

Currently, it is understood that an estimated 3,000 homes are on hold in the private sector, with 650 people affected across the social housing sector’s G15 group.

One housing association source said: “The market is quite challenging anyway, so this is another thing to make sales difficult.

“Reservations are hard. Converting reservations towards exchanges is hard. Then, for tall ones, you’ve got this really big problem, which means it’s very difficult to get a lender offer. Even when you’ve got a lender offer, turning that into a completion is probably tricky.”

The news will come as relief for many in the industry, who are growing increasingly concerned about how this could affect the market, with one source telling Social Housing that Advice Note 14 is “completely wrong”.

The source said: “If you read it and interpret it exactly as it’s written, it prohibits the use of any materials other than those that are of limited combustibility – and there is not a building that has ever been built that has all materials of limited combustibility. It goes too far.”

However, a Ministry of Housing, Communities and Local Government (MHCLG) spokeswoman said: “Advice Note 14 provides advice for building owners on choosing the appropriate course of action should there be any safety concerns about their building’s external walls.

“Advice Note 14 is not a statutory instrument or a compliance document and should not be seen as such. It was produced for building owners and those advising on the fire safety of external wall systems to reassure themselves that the external wall system they have on their buildings is safe and to take appropriate action as required.”

As for when the guideline will be published, Social Housing understands that it is likely to happen after the election, although an exact date is unknown.

Asked by Social Housing for more detail about the guidance, a RICS spokeswoman said: “RICS is currently working with UK Finance, the BSA and the wider industry on a solution to this complex issue. We hope to be in a position to publish an update shortly. We’re also working with MHCLG on this.”