Labour MP Justin Madders has demanded a ban on the building of leasehold houses where there is no justification for them.
Leasehold houses have proliferated as housebuilders exploit the housing crisis to make extra revenues by selling off the freeholds, often to shady investors based overseas who hide behind nominee directors.
Worse, some housebuilders – notably Taylor Wimpey – have built-in revenue streams by doubling the ground rent every ten years.
This embeds value in the freehold, guaranteeing a fast and escalating return, which along with all the other income streams – consents for building works, subletting, development potential – creates a valuable investment.
Freeholds that appear to have been offered to some leasehold house owners for £2,500 now cost £35,000 to purchase from the investor that bought them.
Mr Madders spoke at the All Party Parliamentary Group last week about the mayhem caused in his constituency by these practices.
Both Taylor Wimpey and Bellway Homes have been referenced, but the MP now turns his attention to Redrow, which is building 2,000 homes locally at Ledsham.
“Why on earth would Redrow think that selling large detached family homes as leasehold properties is appropriate?
“There is no good reason for them to do this and they seem to imply they will be selling the freeholds on in due course.
“We know from other developments this can result in terrible complications for homeowners.
“Deals like this need to banned.”
In correspondence to Mr Madders, Redrow said that it “does not include exhorbitant ground rent review clauses in its leases”.
Redrow’s founder Steve Morgan still controls the company and is a figure of stature in the house building sector akin to Tony Pidgley, of Berkeley, the high-end London and South East developer.
It provided the following statement to LKP:
Redrow is a responsible company and does not condone ground rent increases which are well above the prevailing market rate, or unreasonable additional charges.Redrow completed over 4,700 private and social homes in the last financial year, and sells the majority of its houses as freehold. There are parts of the country in which leasehold sales are common practice. In these areas – in practice a small proportion of our total house sales – Redrow sells leasehold. The process is made clear to buyers and their advisers in the run up to and at the point of sale.
The third party acquirers of the freehold are bound by the ground rent review clauses in our leases, which are standard: they are generally reviewed every ten years in line with RPI. We are not aware of any acquirers of reversionary interests levying unreasonable charges in addition to ground rents and we would not condone this.
Although Redrow does not sell reversionary interests directly to its customers, they have a right to acquire them after two years at prevailing market rates. Customers are protected by the Leasehold Reform legislation, which makes provision for the price to be determined by the First tier Tribunal (Property Chamber) in the event it cannot be agreed by negotiation.
Redrow welcomes the All-Party Parliamentary Group’s review and looks forward to its recommendations.