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The influential BBC R4 You and Yours programme featured an excellent report on June 2 Countryside Properties plc flat owners facing doubling ground rents.
Case study Baz Jafar spoke eloquently at how this impacts on his life.
The episode can be heard here: http://www.bbc.co.uk/programmes/b08rp399
Buyer blames Countryside Properties plc for landing him in unsellable flat
… LKP agrees, and so does distinguished mortgage sector spokesman
After the election, the heat is back on Countryside Properties plc, which has been selling off houses and flats with doubling ground rents.
CEO Ian Sutcliffe is also in dialogue with Sir Peter Bottomley … but not the All Party Parliamentary Group on leasehold reform or the Leasehold Knowledge Partnership.
Baz Jafar, the articulate young leasehold flat owner in Edmonton, north London, is again raising the issue with Mr Sutcliffe.
On June 2 2017 Mr Jafar was interviewed by Melanie Abbott on the BBC R4 You and Yours programme after Nationwide, and other banks, ceased lending on properties with onerous ground rent terms.
Mr Jafar told BBC listeners that he had been seduced by a “shiny website” of Countryside Properties plc and “very nice” sales staff who described the leasehold property as “virtually freehold”.
They were “pushy” to have him use their recommended solicitors and brokers, and he was incentivised to go along with it all with legal fees and stamp duty paid for.
“The solicitors that I used were the ones recommended by the housebuilders and they could and should have done a better job explaining clauses in the lease that would impact on me in a negative way.”
Mr Jafars ground rents double every ten years from £200pa to £6,400 a year.
Presenter Peter White said at one point in the programme: “I should explain how many people do not want to talk about this issue: Countryside did not want to appear on the programme. None of the major mortgage lenders wanted to speak. Neither did the Council of Mortgage Lenders. And the Home Builders’ Federation, which speaks for developers, did not want to appear.”
Ray Boulger, mortgage sector commentator at Charcol, said: “Without a doubt [the decision not to issue mortgages on homes with high ground rents] has taken money off the value of these properties. The only question is how much it has taken off.
“It is certainly a worry. Baz is absolutely right to be worried.”
Sebastian O’Kelly, of LKP, said: “We have been getting reports of Nationwide, Barclays and HSBC turning down mortgages on these properties before this announcement by Nationwide, and I am sure that other lenders are being similarly advised by their local people on the spot.”
“Let’s not be in any doubt here. The developers have taken us all for a ride. They have taken taxpayers for a ride; they have taken first time buyers for a ride.
“They should sort it out. There should not be a question of taxpayers sorting this out.”
But Mr Boulger said that the taxpayer will lose out, as Help To Buy accounts for 40% of new build sales.
“If sale proceeds are less than the price paid the government will lose money.
“I absolutely do think that buyers will be entitled to legal redress. Particularly die to the fact that they were incentivised by developers to use the nominated broker and conveyancer. That I think is a key factor.
“There is an obvious conflict of interest between the developer and the broker who owe a duty of care.
“The government should in my view tell the developers that unless they compensate the people caught up in this they will not be able to use the Help to Buy.”
BBC Radio 4’s You and Yours devoted nine minutes on Friday to Leasehold mortgages.
Three of the big six lenders were reportedly no longer prepared to lend on leases with onerous terms, especially doubling ground rents.
‘Baz’ (?) was featured as a first time buyer of a new one bed flat in North London, which he bought from Countryside having been incentivised to use a recommended broker and legal conveyancer after his stamp duty and legal fees were paid. Baz said he was told his 250 year lease was ‘virtually freehold’.
Only later did he find out when comparing notes with neighbours that his ground rent doubled ten yearly in the first fifty years. Baz reported that his solicitor did mention the GR started at £200 and would increase every ten years, but said there was no reference to it doubling. He was dismayed to realise his ground rent would reach £6,400. He was happy that lenders were changing their policies but now worried his flat was devalued. He said that Countryside had referred him to his conveyancer’s obligations, but he felt the conveyancer should have given him ‘Plain English’ advice about the onerous lease terms.
You and Yours shockingly revealed that not only Countryside but ALL the lenders contacted, the Council of Mortgage Lenders and the House Builders Federation had all refused to comment or appear on the programme.
However, You and Yours had been able to establish that Nationwide and Barclays had already changed their lending criteria for leaseholds, and HSBC, Santander and Lloyds were currently reviewing theirs.
Two guests did agree to participate: Sebastion O’Kelly of the Leasehold Knowledge Partnership and Ray Boulger of the independent mortgage brokers, John Charcoal. (“Ray was voted guru of the year at the Headline money awards by all of the nation’s money and property journalists” /quote ).
Sebastion O’Kelly said homes were blighted by these onerous lease and ground rent terms, and small and large developers were building such leaseholds, apparently as a strategy among developers. He said developers were taking everybody for a ride.
Ray Boulger agreed that thousands of new builds were faced with onerous ground rents and in his view legal redress should be available if buyers were incentivized to use nominated brokers and conveyancers due to conflict of interest.
Seabstion O Kelly was asked what should happen, and said tax payers should not have to foot any bills. House developers should be forced to offer the freehold to the owners at its original price, and leasehold flat owners should receive a Deed of Variation to reduce the ground rent.
You and Yours ended by saying they would keep an eye on the topic.
(Me: Every aspect of leasehold takes leaseholders for a ride: from unfair lease terms to the way the courts turn leasehold law on its head retrospectively to penalise innocent leaseholders,such as all those flats who paid sizeable sums to gain multi-block RTM and now find, apparently, that legally they do not (or may not?) have the right to RTM after all, and the volunteer directors may even be in jeopardy — but nobody will say so in straight language and who understands ‘estoppel’ in Plain English?
Will a hung parliament make leasehold reform more or less likely any time soon?)
On the subject of Countryside I have been looking through their website.
To be fair they appear to have received many awards for their projects from all quarters, which includes Local Authorities and Government.
But there is very little on Customer Relation policies except to say that they work with the Local Community.
So it appears that the many young families who actually buy the Countryside properties, whilst being impressed by the above, once they have purchased get put to one side, as is proved by the way they are being treated now on the Ground Rent situation.
Silverpoint is located not far from the Culpepper /Leopold/Genista Roads Estate with leaseholders faced with more than a decade of escalating onerous clauses from Firstport. We complained to Enfield Council development team at several meetings on the incentivised approaches used to market these developments while the most important information is not disclosed to prospective buyers.
We are alarmed that the council ignored our concerns and authorised Countryside to include onerous clauses which is like a nail in the coffin for young home owners facing financial ruin.
It is a scandal
Mer C, do you have any more info on this?
I’d like to get in touch with you as I’m going to be writing to the council demanding to know how they’ve allowed this to happen again.
If you email Sebastian O Kelly at LKP he can put you in touch with me.
Pro bono publico
The real root of the problem lies with the corrupt solicitors / conveyancers that prostituted themselves out to the developers.
In return for keeping quiet about the ruinous ground rents they were guaranteed a flow of new clients from the developers – lambs to the slaughter.
It’s difficult to imagine a more gross and obvious conflict of interest. If they had done their job professionally and warned their clients about these ground rents they would have pulled out of the deal.
Result? No more lucrative referrals from the developers. So instead they turned a blind eye and let these poor people sign up to the deal from hell – and then had the cheek to charge them for the work!
These solicitors / conveyancers should not only be sued for negligence but should also be subject to disciplinary proceedings and struck off the register.