Staircasing for £nil valuation - cladding hangover - advice please

howardmeer

I'd like some advice on the following situation please as I can't find the same anywhere else - not even Mr Google seems to be able to help with this situation:

Background
Shared Ownership owner of 30% share (SO). 70% owned by a Housing Association (HA).
In early-2019, SO finds out building covered in non-compliant cladding. All sales in the block fall though. SO tried to sell - no one will buy - re-mortgate = £nil valuations.  In 2020, HA confirms non-compliant cladding - confirmed by expert fire report and EWS-1 form say "B2" - requires remedial works.  HA cannot give 'guarantee' leaseholders will not be recharged costs (this is 2020, so before the govt. Building Safety Fund) nor can they confirm the timescale.
Nonetheless SO applies for staircasing.
Lease says Valuer is appointed to carry out valuation and that value is binding on both parties (SO and HA, i.e. there is no right of appeal). HA confirms in writing that it is the SO who pays for and may instruct any RICS surveyor and then based on that the HA will confirm the value of the 70% share. HA also provides SO with their official Guide to Staircasing which confirms the email instructions. All other SO's in the same situation have followed this same process prior.

Valuation 
On that basis, SO instructs a RICS valuation specifically for staircasing purposes (to be clear, not mortgage or Home Buyer survey etc, specifically for staircasing). March 2020 valuation is carried out and comes back at £nil due to cladding issue resulting in material uncertainty as HA cannot give guarantee that cost will not be recharged, nor a timescale for the works. Surveyor confirm compliance with Red Book and RICS advice at time of valuation, i.e. a legitimate valuation and not just "I don't know, so will just put £0"; it was fully reasoned.
SO, as instructed by the HA, applies to buy the HA's 70% at the stated £nil valuation!  

HA reply
HA refuses to process sale at £nil valuation and then begins to back-track on what they put in writing and dispute valuation and Lease wording - none of which make any sense or consistent with their written instructions or their official Guide. SO insists on £nil valuation and re-confirms HA's own instructions and Lease states valuation is binding on both parties.
HA and SO are currently in statemate as SO still can't sell or re-mortgate and of course the HA are refusing to staircase.

SO is looking for advice on how they can go about enforcing the valuation and getting the HA to honour their word etc...

Advice/comments welcome please.

caprikid1

I think what you are attempting to do is quite clever in many respects.

It feels like you will need to lawyer up to push this forward though, they are not just going to go have it for free without a fight.

user1977

I would expect that the terms of the original agreement will apply and not whatever the HA may have mistakenly said subsequently.

Also - does any potential liability for cladding increase with the larger share? Might not be sensible to get the extra share and then be hit with an even bigger bill.

Gycraig

Absolutely genius. Lawyer up 

howardmeer

caprikid1 said:

I think what you are attempting to do is quite clever in many respects.

It feels like you will need to lawyer up to push this forward though, they are not just going to go have it for free without a fight.

Issue is that this is such a 'unique' situation, there is case law or guidance on, so I'm getting mixed advice from lawyers. However, all are warning it could be very expensive to pursue and if lost, the HA's legal costs could be substantial.

howardmeer

user1977 said:

I would expect that the terms of the original agreement will apply and not whatever the HA may have mistakenly said subsequently.

Also - does any potential liability for cladding increase with the larger share? Might not be sensible to get the extra share and then be hit with an even bigger bill.

Yes - that's what I said. The Lease terms take precedence and that says the valuation is binding on both parties, i.e. no 'appeal' or 'dispute' mechanism to speak of.  Add to that the HA's own Guidance and fact they have done it this way for others in the same block all says, they have to accept the £nil valuation.

Cladding-wise, the HA has now (subsequent to their refusal to complete the staircasing etc) applied to the govt Building Safety Fund and show get the full remedial costs covered - however, to be clear, that was not available when the staircasing application was made; hence at the time, the HA could not guarantee/confirm the cost would not be recharged to leaseholders.  

howardmeer

Gycraig said:

Absolutely genius. Lawyer up 

I wish it was that easy - costs to pursue and in risk of losing and paying the HA's costs needs to be considered first.... but the case seems strong...

howardmeer

There must be situations where a SO and HA have disputed a valuation when staircasing.... does anyone have experience of how it was resolved?

Grumpy_chap

OK, so the OP wants to pay £nothing to buy the other 70% of a property for which 100% is valued at £nothing.
That makes sense.
BUT, the reason for the £nothing valuation is cladding. 
What will the cladding potentially cost to remedy? 
Is that more or less than 100% of the property value post-cladding remedy?
Does the OP's liability for the cladding bill increase from 30% to 100% if they staircase?

howardmeer

Grumpy_chap said:

OK, so the OP wants to pay £nothing to buy the other 70% of a property for which 100% is valued at £nothing.
That makes sense.
BUT, the reason for the £nothing valuation is cladding. 
What will the cladding potentially cost to remedy? 
Is that more or less than 100% of the property value post-cladding remedy?
Does the OP's liability for the cladding bill increase from 30% to 100% if they staircase?

Fair point.
At the time (mid-2020), the HA could not guarantee the cladding cost would not be re-charged to Leaseholders. However, the HA has now (subsequent to their refusal to complete the staircasing etc) applied to the govt Building Safety Fund (late-2021) and show get the full remedial costs covered - to be clear, that was not available when the staircasing application was made; hence at the time, the HA could not guarantee/confirm the cost would not be recharged to leaseholders.
So currently, no risk to the SO on cladding costs etc.
Also, (thank to Mr Gove), the Building Safety Act makes it unlawful for freeholders to re-charge most leaseholders now (some exceptions).

howardmeer

Grumpy_chap said:

OK, so the OP wants to pay £nothing to buy the other 70% of a property for which 100% is valued at £nothing.
That makes sense.
BUT, the reason for the £nothing valuation is cladding. 
What will the cladding potentially cost to remedy? 
Is that more or less than 100% of the property value post-cladding remedy?
Does the OP's liability for the cladding bill increase from 30% to 100% if they staircase?

Also, one of downsides of SO is that leaseholders are liable for 100% of costs associated with the property, notwithstanding they only own X% of it - so SO always have to pay 100% of rechargeable costs like service charges....