Staircasing for £nil valuation - cladding hangover - advice please

GDB2222

You got the valuation in 2020, and you have been arguing about it ever since?  Is that right?

If you go to court, they won't want the precedent. So, they'll probably defend this tooth and nail, but you might get lucky and they opt for a quiet settlement.  If you lose, it could cost you £50k. Much more if it goes to appeal. Can you afford that?

You can just make a formal complaint, which is risk-free.

k12479

howardmeer said:

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.

Have any cladding-affected property transactions occurred for £0? I doubt they have, however, I imagine many cladding-affected properties will have changed hands to cash buyers for real, albeit discounted, values. I think the claim that your valuation is legitimate would be hard to defend.

caprikid1

"However, all are warning it could be very expensive to pursue and if lost, the HA's legal costs could be substantial."

I think it if you really want to pursue this I would suggest finding a lot of like minded individuals to stump up some cash to start this.

If you fund it and win you effectively hand them the judgement for free, don't expect to get this done for £50K so if you have less than that behind you don't even bother starting. The only way to get close to achieving this is at least 20 others in a similar position willing to put in at least £10K each to start... £10K that they are willing to turn into a £20K loss if you lose.

Personally I hope you lose as I am sick of our housing stock being given away at huge discounts and family's with genuine need sitting in bedsits.

eddddy

howardmeer said:

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

Unfortunately, I think there may be a 'loophole' in your plan. 

I'm more familiar with lease extension valuations, or freehold purchase valuations - and your plan probably wouldn't work for those.

I would guess  that staircasing valuations might work in the same way, but I don't know for sure.


The 'loophole'/problem is...

• The valuation should assume that all covenants in the lease have been performed (that's covenants by the leaseholder, and covenants by the freeholder).

• In simple terms, there's likely to be a covenant in the lease saying that the freeholder must observe health and safety regulations - which would mean the freeholder has to replace flammable cladding.

• So the valuation should be done though the freeholder has performed the covenant, and has replaced the flammable cladding

To be honest, SO staircasing valuations probably have to be done that way - otherwise you could get a ridiculous situation like this:

• The roof of a block of flats blows off in a storm on Wednesday

• So on Thursday, every SO leaseholder rushes to get their flat valued for staircasing while there's no roof on the building - before the freeholder has had a chance to get the roof fixed. And they all get valued at £0 because there's no roof.

But maybe take legal advice on that.

Lunchbox

caprikid1 said:

Personally I hope you lose as I am sick of our housing stock being given away at huge discounts and family's with genuine need sitting in bedsits.

Many Housing Associations build and run these Shared Ownership properties through their own ‘investment’ arms earning huge profits, selling to people who genuinely cannot afford to purchase outright and gradually ramping up rent and service charges to well above market range. They also take huge cuts of all contracts charged back to residents for services and tend to have rather questionable procurement processes. It’s in no way comparable to right to buy.

howardmeer

eddddy said:

howardmeer said:

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

Unfortunately, I think there may be a 'loophole' in your plan. 

I'm more familiar with lease extension valuations, or freehold purchase valuations - and your plan probably wouldn't work for those.

I would guess  that staircasing valuations might work in the same way, but I don't know for sure.


The 'loophole'/problem is...

• The valuation should assume that all covenants in the lease have been performed (that's covenants by the leaseholder, and covenants by the freeholder).

• In simple terms, there's likely to be a covenant in the lease saying that the freeholder must observe health and safety regulations - which would mean the freeholder has to replace flammable cladding.

• So the valuation should be done though the freeholder has performed the covenant, and has replaced the flammable cladding

To be honest, SO staircasing valuations probably have to be done that way - otherwise you could get a ridiculous situation like this:

• The roof of a block of flats blows off in a storm on Wednesday

• So on Thursday, every SO leaseholder rushes to get their flat valued for staircasing while there's no roof on the building - before the freeholder has had a chance to get the roof fixed. And they all get valued at £0 because there's no roof.

But maybe take legal advice on that.

Thanks for the advice/view Eddddy - you've made interesting points.

On the valuation 'loophole' (as you say), my understanding of what you're saying is that the HA could dispute the valuation by saying it was not carried out correctly based upon the points you raise - I get that. However, the HA has not raised these issues despite the SO giving them the opportunity to raise objections with the surveyor for him to respond to; the HA just said they did not agree with the valuation - they actually started started saying the valuation was just for "mortgage purposes" which it clearly was not.

On the 'roof blown off' example you give, I see your point. However, the surveyor specifically asked the HA for (i) an estimate of the likely cost of the cladding remedial works, (ii) the time frame to complete the works and (iii) if Leaseholders would be recharged the cost, so he could take that into account when giving a valuation. The HA could not provide a response to any of these points.  In your example of the roof, it's likely the repair would be covered by insurance (so not recharged to Leaseholders) and an reasonable estimate could be provided for the cost and time scale of replacing the roof, thus giving the surveyor some grounds/evidence to base a valuation on.

In the SO case, the HA was not able to give any estimate for the remedial costs, but more importantly, it could not guarantee that the cost would not be recharged to the Leaseholder (or any new purchaser) - would you still buy the property with that level of uncertainty? Would a conveyancer advise to proceed with a purchase without knowing the potential future cost?  I think not... 

howardmeer

Lunchbox said:

caprikid1 said:

Personally I hope you lose as I am sick of our housing stock being given away at huge discounts and family's with genuine need sitting in bedsits.

Many Housing Associations build and run these Shared Ownership properties through their own ‘investment’ arms earning huge profits, selling to people who genuinely cannot afford to purchase outright and gradually ramping up rent and service charges to well above market range. They also take huge cuts of all contracts charged back to residents for services and tend to have rather questionable procurement processes. It’s in no way comparable to right to buy.

Thanks for jumping to my defence Lunchbox!

The SO block was actually constructed by Barratts as part of the (s.106) planning condition, so in effect, the HA got the block for free from Barratts.  Barratts (actually Ardmore, their contractor) built the block to a lower spec that the private housing and to a very poor standard - for example, Barratts have just discovered that the concrete frame of the block was not built strong enough and have had to install steels to strengthen it, both externally and now are having to undertake internal strengthening works too.
No loss at all to the public purse and in any event, SO is someone who a "family's in genuine need" as they have been trying to sell to move to a large property since 2020!

howardmeer

k12479 said:

howardmeer said:

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.

Have any cladding-affected property transactions occurred for £0? I doubt they have, however, I imagine many cladding-affected properties will have changed hands to cash buyers for real, albeit discounted, values. I think the claim that your valuation is legitimate would be hard to defend.

As far as I can see (Rightmove, Zoopla, Land Reg data) nothing has sold in my block since mid-2019 (so before the non-compliant cladding was discovered). I'm pretty sure even cash sales would show up somewhere on these sites, so if I am right, this supports my assertion that in fact properties are worth nil in current state because nothing has sold.

user1977

howardmeer said:

k12479 said:

howardmeer said:

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.

Have any cladding-affected property transactions occurred for £0? I doubt they have, however, I imagine many cladding-affected properties will have changed hands to cash buyers for real, albeit discounted, values. I think the claim that your valuation is legitimate would be hard to defend.

As far as I can see (Rightmove, Zoopla, Land Reg data) nothing has sold in my block since mid-2019 (so before the non-compliant cladding was discovered). I'm pretty sure even cash sales would show up somewhere on these sites, so if I am right, this supports my assertion that in fact properties are worth nil in current state because nothing has sold.

The RICS guidance will probably have something to say on this, but I doubt that logic works - a slow (or non) moving market doesn't mean the properties are valueless. Everybody could simply be biding their time (and a large proportion I expect are mortgaged, so can't be sold for any less than the current mortgage balance).

caprikid1

Lunchbox said:

caprikid1 said:

Personally I hope you lose as I am sick of our housing stock being given away at huge discounts and family's with genuine need sitting in bedsits.

Many Housing Associations build and run these Shared Ownership properties through their own ‘investment’ arms earning huge profits, selling to people who genuinely cannot afford to purchase outright and gradually ramping up rent and service charges to well above market range. They also take huge cuts of all contracts charged back to residents for services and tend to have rather questionable procurement processes. It’s in no way comparable to right to buy.

Everything about housing associations is quite dodgy, my father did a dissertation on them and spent a large amount of time studying them. Huge amounts of government funding is sucked into these organisations and who knows where a lot of it goes ! As corrupt as a lot of major charities, they are very difficult organisations to get information on as they are not regulated like companies or charities,