Cladding EWS Update Q1 2022

Has any progress been made on this issue? Or is the UK Government still brushing it aside in the hope that someone else will pay for their stuff up.

Unfortunately as with all government it takes a ridiculous amount of time. Let's take a look.

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Unfortunately the Conservative Government has decided now that Landlords with more than 1 property will no longer have access to ANY form of support through this scheme. Stating that because they have properties they have the means to pay themselves. This is an appalling decision on their part and I cannot tell you how pissed off I am at their attitude. 

It shows you how out of touch and not giving a Sh*t politicians are now, so out of touch. You can see it with so many things now the blatant disregard for voters and the entitled approach. 

Unfortunately it's not just the UK that has horrible people as politicians these days. You can see why so many revolts against their authority are happening around the world. From Singapore, Canada, Australia, New Zealand, UK and the US the whole political structure is failing. It's not even democracy, it's all forms where politicians are overstepping into our inalienable rights as humans. 

Anyway not doubt you will be hearing more from me on this side of things. 

Video Transcription

Hey guys, so cladding update what's going on in the first quarter of 2022?

So I think first of all planning so if you're not familiar with this, or you're not sure this or even if you block manager hasn't addressed this yet with you cladding is the external wall systems and the form that needs to be filled if your transaction is AWS one.

So what does all this mean?

Basically, Grenfell Tower burned down, lots of people died, horrible, horrible thing to happen. There was a whole expose a of things that went wrong with it. And as a result of that, they realised that their government building regs, the government's building, and building regs were not sufficient. So what they've done is they're retro actively looking at all properties. And they'd have to remove the external wall cladding. Yeah. And replace it with fire state safe stuff.

Now, problem with that is who pays.

Now, this is the thing, the government's own rules, which developers meet. Yeah, and which you bought your properties based on? Were such, they've changed and they've changed retrospectively.

Now, that's the big problem. Because what's happened now we're having to go back and fix it. Whereas normally, we normally look forward, if it doesn't building race, but because it's people burning and that sort of thing. They've done that, I can understand that. The challenge is, is they should have known better. Yeah, their own regulations should have known better. Anyway, let's not get into that, he says, she said, who's responsible, all that sort stuff. The bottom line is, is that as a landlord, you are having to pay, whether that be through a, you know, the sprinkler system, whether it be through guys walking around the building 24/7 to make sure there's no fires, whether that be actually getting funding from the government, because there is funding available from government.

But we haven't actually seen any real funding come through yet. So the problem we have is that 1300 properties we manage, no one has actually really got funding from the government yet, it seems to be,  incredibly hard to get.  Which I think there's a whole debacle there that is, you know, the government's approach has been very much slowly, slowly force it onto landlords, let alone landlords pay as much as need to that will decrease our bill. And we'll try and pay our bill, you know, way, way down the track.

Now, the government has put 3.5, or about 4 billion into a fun saying that we'll do this. But what I've said is they expect developers to pay the bill. Okay. So they're taking no responsibility. They're basically saying developers you want to develop, you got to pay. So how that's going to be well, they've got to come up with ideas. Now, really, this is going to affect the bigger developers more than the smaller developers, but it's likely to affect all developers too. Because, you know, for billions, a lot of money, you know, what the grand scheme of things the government could fix it, the real challenge is this.

Alright, forget all funding federal that is, in order to get the cladding sorted, there's not enough contractors out there to do the job. Okay. So some people saying could take 20 years at the current rate to get all the buildings that need to be done. Now, here's the problem, if your buildings affected, okay, and this is the problem is that over 18 metres, 80 metres is considered to be the point at which problems happen. 18 metres, if you're over 18 metres, and your cladding is not appropriate, it has to be removed, or there has to be a fire warden or there has to be a sprinkler system externally fitted effectively. Otherwise, there's not a mortgage company in the country that will actually lend you money on that.

So if you want to sell you're going to sell for cash. If you want to sell for cash, the person buying it has to accept the risk that they may have costs. So your prices are going to be sort of 20 to 30% 40% below what the actual property is worth.

Alright, so if you're in a situation where you have to sell, you're screwed, because nobody is going to offer full asking price or full valuation on the property, without the EWS1 form in place. If it's in place, then fine, open market, no problems. If it's under 18 metres, it still can be affected by this. Alright, because basically what's happening, mortgage funders are saying, Why should I take the risk? How do we know the government's not gonna change the rules and say, You know what, it's on all buildings. It's on all cladding, you know, so this is this is some of the issues that we're facing right now.

Now look, that's the first bit of cladding. Alright, it's a debacle. It is an absolute, I mean, we've had to hire an extra person full time, just to deal with this crap and the block management and every block manager is approaching a different some are putting in waking watch they call it which is the person walking around, some is talking, you know, sprinkler systems we've had that some are doing the cladding and you know, getting it down. So you know, so there's a whole range of different approaches.

Now, some of these fees are incredibly expensive, like 80,000 bucks per flat. Yeah. So that's, you know, that's the worst I've seen. And what they're doing is they're saying that we've got somehow investors having to pay 2000 pounds per month towards service charge towards this bill, which is just extortionate. And it's ridiculous. And it shouldn't be happening. But government should have sorted this, considering it is they're doing 100% They're doing, they can try and blame it on the, you know, the marketplace in the way that they made the building regs, they chose the building regs. Yeah. Anyway. So that's one aspect of cladding.

Now, if you're in a situation where you're thinking about selling, you want to sell, or maybe you're just, you know, checking it out, and you haven't got an EWS, well, then you're in problems, you know, you're going to be accepting this. So you either have to hold on to it until this is sorted out, which could be who knows how long down the track.

So you know, a lot of places are sorting it. But in order to get that, that that certificate to say it's okay, the cladding is fine. Problem is this cladding was used quite a lot. Alright, so we're already starting to see some things that they haven't either had the test or that had the test and failed, and therefore the cladding has to be replaced. And now they're in line, trying to get someone to do it. So what's likely to happen?

I mean, the thing is, if you haven't got AWS, I think you've got to really hold it out if you can, otherwise, the costs are too great of having to emergency sell. So if you need help with your portfolio and reviewing that and getting the numbers, then by all means, give the team a call.

The other side, if you have got the EWS, well, then it's a normal system. It's normal marketplace, no problems whatsoever. If you just on that point, if you look on the next point, actually, if you're looking to sell, then really, we have in the UK, really two areas, the market, the spring bounce is not much happening over Christmas spring bounce, which will start in about March, April, okay, where prices and activity starts to pick up.

Okay? So we're kind of heading into that now, where we're starting to not yet get the spring break, but we will have soon, okay, so that's a good time to sell, it's a good time to put on the market, lots of people do, lots of people look to move, alright, you've then got a lull period over the summer, when not a lot happens, still stuff happens. But then you've got the pre Christmas or the post, you know, summer, you know, again, activity picks up again, before Christmas happens. 

So they're the two sort of areas where you probably would be looking, but spring bounce is always a good time to look at it. Me personally, I think we've got the spring bounce this year, we're unlikely to hit recession by then. But who knows, you know, for me, I've said recessions 50/50. But the UK is pretty strong. I think coming into this, you know, we've had pretty low time, you know, especially in with property prices. So I think what's going to happen after that is we've got likely to have a bounce prices will continue to go up.

And I'm you know, I'm saying plus 5% this year, I think it's going to be extraordinary, because there's a lot of headwinds around the world, whether it be supply chain, whether it be inflation, because inflation is you know, certainly certainly hit and you'll start to really feel that. But you know, so inflation, the the other side of it is, is that if a recession happens, I think we're likely to drop and come back and the places will come back to the place of the best fundamentals.

Okay, so that's sort of my take on things where we're at, if you can hold on for this year, then I think actually, you potentially will get a good, you know, set of growth this year, if we don't go into recession, good steady growth this year, and potentially good steady growth next year. And we may miss a recession.

Okay, now, just because the US goes into recession, which they potentially could doesn't mean, that we will, things are pretty strong. Yeah, there's, you know, everything about me tells me high inflation is going to have to cause you know, interest rates to rise, which I think that's where we're changing, interest rates will rise, the question is whether you can afford it anyway.

So a little bit off track from the cladding, but I think with that side of things, if you can keep it, keep it, because this, the opportunity to sell is going to be too much cost. Okay. But if you have to sell, then, unfortunately, gonna be looking at somewhere between 20% - 30% You know, drop in the price, okay. Yeah, and certainly, if you're above 18 metres, it's actually more but even below 18 metres, we're now starting to, you know, have looking at the single story or two story, then that's probably not too much of a problem. It's not even an issue. But certainly, as you start to get to 16 metres and 14 metres and that sort of stuff.

That's where you can sort of start to get, you know, lenders are concerned, and that's one of the issues is lenders, not lending, you know, if they were lending, it wouldn't be so much of a drama potentially would be able to sell for more. 

And you guys have a great day live with passion. And if you are concerned about this, give the team a call. And we can run the numbers and see where you're at, to where they need to sell whether you need to refinance, whether you're into, you know, whatever it is, like I say bye.


Brett Alegre-Wood
February 24, 2022

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