The tragedy of the Grenfell Tower remains etched on people’s minds and in people’s hearts. Its charred remains stand there as a cemetery in the sky, reminding people daily of what happened. Besides the traumatic ramifications for the residents, neighbours and their families, the tragedy is makings its impact felt across the nation, and probably further.
Fire safety measures were revisited everywhere, and especially cladding on tower blocks were placed under close scrutiny, as it was believed to be the greatest cause behind the carnage in Grenfell Tower. Many residents of other, similar, towers have been sleeping far less comfortably, or had to be moved out, at great cost to the landlord and local councils. Property owners see property values fall as units are now hard to let and sell, mortgage lenders become more cautious and housebuilders and developers revisit the drawing boards. Ground rent funds might be impacted due to disputes over who pays for what. Remedial works or surveillance measures are expected to cost various parties serious amounts of time and money. The (local) government for one will have to step in and step up.
Until the Government makes changes to the Building Regulations and/or to their cladding standards, many apartment owners find they cannot sell or let their properties. Some 300 social housing blocks appear to have defective cladding, but only 10 out of 159 Councils have begun remedial work; central Government (with a £400m fund) or local tax payers will have to meet these costs over the coming years. In the private sector 138 buildings (so far) appear to have similar cladding to Grenfell Tower and these include blocks in London, Slough, Liverpool, Manchester & Salford.
The issue affects old and new towers. Blocks of flats completing now will need to provide tenants sufficient comfort over their safety with regards to the cladding and other safety measures such as escape routes, sprinkler installations, fire doors and dry risers. Some developers are taking action, despite the costs to them, but we are not sure if all are, and if all are giving out sufficient information about fire safety deficiencies to residents. However, sometimes remedial work is not being done as it’s not possible – but not from a technical point of view.
Pinnacle, the managing agent for the four blocks of the New Festival Quarter in Poplar, has applied to the National House Building Council (NHBC) for a review of Bellway’s building practises, yet they cannot calculate the replacement cladding costs as the Government has yet to agree to new standards. This makes it impossible to move forward.
What other costly examples are there of impacts across residential schemes? There are some leading lights that took preventative action. Bellway for example committed £400,000 of their own funding to fit alarms and heat detectors to New Festival Quay. But more money is being spent: service charge increases include c. £500,000 spent over the last eleven months on fire marshals. These costs are not recoverable from the NHBC or Bellway. The 500 home New Festival Quay in Greenwich built by Galliard Homes is believed to be the largest private development in London with flammable cladding. The current projection for replacing the cladding is estimated at some £10m.
Mace is believed to be paying around £100,000 per month to cover the cost of extra fire safety measures introduced following the discovery of Grenfell-style cladding on one of its London developments. The £100,000 covers the costs of a 24/7 fire patrol, or ‘waking watch’, in one of the blocks at its £225m Greenwich Square Project, although other parts of the development are unaffected. The ‘waking watch’ was installed at Greenwich Square following a London Fire Brigade inspection of the development in March, which concluded there was unsuitable cladding being used.
The above examples will put many other housebuilders and developers on notice.
Besides the obvious impact that it is harder to let out affected apartments, lowering rental income and their value, or even making it nigh impossible to sell, managing agents will struggle to recover the fire safety costs from leaseholders and freeholders. Government, Councils and leaseholders are likely to see higher costs to remedy the defects.
Grenfell Tower had and continues to have an enormous impact in many ways. We cannot stand by and let it happen again. We owe that to the memory of too many people. Let’s get this sorted.
Written by Charles Fairhurst, an experienced UK PRS fund manager and trainer on the Institutional PRS courses run by Property Overview