The buyer discovered that no EWS1 certificate was in place after her offer to purchase the property was accepted. Her preferred mortgage lender valued the property at nil on the basis that the building did not have an EWS1 certificate. A second mortgage lender also valued the property at nil on the same basis.
The buyer was seeking reimbursement of her abortive legal costs (conveyancing fees, mortgage valuation fee and searches) totalling £1,713.71 plus £200 financial compensation for the time and effort she expended in resolution of the dispute.
Background to the External Wall System (EWS) survey and EWS1 certificate
The External Wall System (EWS) survey was introduced by RICS in response to the recommendations made in Advice Note 14 which was issued by the Ministry of Housing, Communities and Local Government (MHCLG) in December 2018 following
the Grenfell Tower disaster. The initial purpose of the EWS survey was to check whether residential high-rise buildings over 18 metres or six storeys in height were safe and free from combustible materials, and to recommend remedial work where necessary.
The EWS1 certificate is not a legal requirement. It provides verification that an EWS survey has determined that a building had been found to be free of combustible materials and thus provides assurance to mortgage lenders and insurers.
In January 2020, MHCLG updated guidance on fire safety checks and cladding which expanded the application of external wall system assessments to buildings of all heights. As a result, the EWS survey process became applicable to all residential buildings which had or were likely to have combustible material on external walls, irrespective of height. However, in July 2021, after obtaining expert advice, the government declared that EWS1 certificates should not be requested for buildings under 18 metres and mortgage lenders agreed to review their practices in light of the new guidance.
Investigation
When marketing the property for sale, the agent had an obligation to disclose any ‘material information’ of which they were aware in relation to the property in a clear, intelligible and timely fashion. Material information is information which an ‘average’ consumer needs to make an informed transactional decision.
The agent did not dispute that a previous sale failed to progress as the management company had not provided the prospective purchaser’s lender with sufficient evidence that an EWS1 certificate was not required for the building.
The agent explained that, as a result, they had instructed their staff to disclose the nature of the previous sale falling through to all prospective buyers who viewed the property.
It was the Ombudsman’s view that the previous failed transaction and reasons for the prospective buyer’s withdrawal from the purchase of the property constituted material information which was likely to influence the average purchaser’s transactional decision.
The Ombudsman was also mindful of the National Trading Standards Estate and Letting Agency Team (NTSELAT) guidance for compliance with the CPRs, which states that cladding and fire safety is material information which should be provided to consumers (buyers) at the earliest possible opportunity.
The Ombudsman accepted the agent’s point that there had been ambiguity surrounding the EWS1 certificate and the requirements of different lenders, as the July 2021 government guidance indicated that an EWS survey would not be required for the building in question as it was under 18 metres.
However, the agent was on notice that a mortgage lender had previously requested an ESW1 certificate which could not and would not be provided by the management company. Therefore, the agent was aware that there was a possibility that other buyers would also experience the same issue.
Consequently, the Ombudsman expected the agent to have informed all prospective purchasers of the failed sale due to the lack of EWS1 certificate at the outset.
The agent claimed that this information was provided to the buyer at the outset, but they provided no evidence to support their position. Furthermore, the agent explained that they emailed their recommended mortgage broker in January 2022 and asked that the buyer be given advice about EWS1 certificates, but again no evidence was provided to support the claim. In any event, the Ombudsman pointed out that it was the agent’s responsibility to provide this information directly to the buyer, aside from the fact that the buyer did not decide to use the services of this mortgage broker.
Outcome
The Ombudsman concluded that the agent had failed to inform the buyer that a previous sale had fallen through because the mortgage lender required an EWS1 certificate.
In considering an award, the buyer had explained that if she had been aware that a previous transaction had fallen through because of the lack of an EWS1 certificate, she would have applied to a lender who did not charge for a valuation survey (as she did when the first lender returned a nil valuation). As such, the Ombudsman was unable to conclude that the buyer would have made a different transactional decision had the information been provided from the outset.
The Ombudsman made an award of £300 compensation to reflect the undue and avoidable aggravation and inconvenience which the agent’s failure to disclose material information caused. The agent was also directed to compensate the buyer the £275 fee she paid for the mortgage valuation.
