… And we’re not going to do anything, either
Eye-watering doubling ground rents at Redrow’s prime City tower block Crawford Building have been bluntly brushed aside as a concern by the developer that has profited from them.
A leaseholder has contacted Sir Peter Bottomley and Labour MP for Bethnal Green & Bow Rushanara Ali stating that he has to pay £600 a year in ground rents that subsequently double every ten years on five occasions until they reach £19,200 a year.
These are among the highest ground rent charges LKP has encountered from a plc housebuilder.
The doubling ground rent terms mean that flats at Crawford Building would fall foul of Nationwide’s lending guidelines, which prohibit loans where doubling ground rents apply. This bar is followed by many other lenders – all now nervy of the ground rent scandal perpetrated by plc housebuilders.
Flats at Crawford Building, built above Aldgate East Tube station on Whitechapel High Street, sell from £500,000 for a one-bed. This may mean that the ground rent terms also exceed Nationwide’s bar on lending where ground rents exceed 0.1 per cent of the sale value of the flat.
Two beds are advertised for re-sale at just under a million, so at £600pa would be within the lending criteria … until they double.
The leaseholder writes to Sir Peter Bottomley:
“Mortgage lenders are already refusing to lend on properties with punitive ground rent leases.
“Preventing more of these leases being granted is clearly the right thing to do but, without direct government action, it is only going to make the situation worse for those of us who are unfortunate enough to be left with these onerous escalating ground rent situations.
“What needs to be done in the new legislation is to prevent future abuse but, as importantly, deal with existing ground rent abuse.
“Otherwise, you are going to be leaving people in apartment blocks and homes with even more unsellable properties and even fewer lenders will lend on these properties.”
The issue had obviously been raised by leaseholders with local MP Rushanara Ali in September last year.
Redrow ‘regional chief executive’ Keith Parrett could not have been blunter in his response.
“The ground rent at £600 per annum is not unduly high as a proportion of the original selling price and is in line with the market for apartments in the area …”
This is a highly dubious assertion, when LKP is aware that ground rents at super prime Neo Bankside – beside Tate Modern and overlooking the river and St Pauls – amount to £680, even though penthouses sell for £8 million.
“…. we would not dispute your calculation that the ground rent in 50 years time will be £19,200.
“This compares to £15,000 on a cost of living basis for the last 50 years.
“It should also be noted that depending upon the rate of house price inflation, the ground rent as a proportion of the properties value is not likely to significantly change: indeed, applying house price inflation over the past 50 years, the proportion would be significantly lower.
“The ground rent charged is also in line with the latest guidelines issued by the Nationwide Building Society.”
This last point in incorrect: Nationwide has made clear that it will not lend on properties with doubling ground rent.
“In conclusion, I can confirm that whilst doubling ground rents may lead to rents being higher in the years to come than might be the case against an RPI multiplier, the rent should remain relatively affordable against the value of the property and we therefore have no intention of taking any further action.”
Mr Parrett’s letter to Rushanara Ali MP is below.
He adds in it: “Certainly our purchasers would have been well aware of the ground rent and the multipliers when they purchased as would their conveyancing solicitors and their mortgage providers.”