Flammable-Cladding Crisis in Residential Towers: The UK’s Housing Nightmare with “Mortgage Prisoners”

And who is going to pay? In the world of “leaseholders” and “freeholders.”

Imagine owning an apartment in a high-rise building that is suddenly deemed to be a fire trap. Next, you discover that you and all your neighbors will have to pay tens of thousands of pounds each to have the flammable insulation and cladding materials on the outside of the building replaced. You cannot sell the apartment because lenders are refusing to write a mortgage on the apartment. To cap it off, you’re told you have to pay hundreds of pounds a month, in the midst of a global recession — in addition to the mortgage payments and other costs — to cover the costs of round-the-clock fire-patrols to make sure the building you occupy doesn’t suddenly go up in flames.

This nightmare scenario is becoming increasingly common for leaseholders of apartments in the UK. Following the deaths of 72 people in the fire on June 14, 2017, at the 24-story Grenfell Tower in London that had been fitted with highly flammable insulation and cladding, similar materials have been uncovered at thousands of towers across the UK. Owners of flats in smaller buildings have also had their lives upended because their blocks were built with unknown or dangerous materials.

So first… “leasehold” arrangements are still common in England, particularly with regard to apartment buildings with some common land and building use. When an apartment is purchased as a leasehold, the buyer is really no more than a tenant, albeit one with a tenancy agreement that typically lasts for up to a century. The “freehold” — the building and the land — belongs to somebody else, usually the developer or another entity that the developer sold it to, and they are able to extract annual rent on those assets. The terms of the leases have become increasingly onerous as global investors have bought up the “freeholds.” The government has finally been shamed into at least pledging to change this archaic system.

The new building fire safety rules and regulations that came into effect after the Grenfell fire, while largely welcome albeit decades too late, have sparked a host of unintended consequences for the UK’s apartment market.

Mortgage lenders have refused to offer loans for any properties in high-rise buildings that have been flagged as firetraps or have yet to be inspected but could prove to be firetraps. As a result, the vast majority of the UK’s high-rise apartments, which sit at the bottom of the property ladder, are for the present moment impossible to sell or buy…

Continue reading the article on Wolf Street

Leave a Comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s