The influential BBC R4 Today programme this morning devoted five minutes discussing the ground rents housing crisis.
It featured a report of leasehold house owners in Clitheroe, Lancashire, who had bought their properties from Taylor Wimpey.
Leaseholder Andrew Henderson told the programme that the ground rents doubled every ten years and were now difficult to sell.
Sales of neighbouring properties had fallen through.
“If you ever want to sell the house this is an onerous lease and it might put potential buyers off.”
Property sales had fallen through as a result of the lease terms.
Mr Henderson added: “It is more likely we are renting rather than homeowners.”
In fact, leaseholders are simply long tenants and are referred to as tenants in all legislation.
Taylor Wimpey told some leaseholders that buying the freehold would cost around £4,500, but then sold them on to unknown investors.
As a result the price quoted for buying the freehold has shot up 10-fold compared to estimates originally provided by the developer.
“This is not Knightsbridge,” Mr Henderson said.
Astonishingly, neither Taylor Wimpey nor the British Property Federation would field a spokesman for the programme, which is almost certainly the most influential current affairs programme that exists.
However, Sebastian O’Kelly, trustee of LKP, was interviewed by presenter Sarah Montague.
She asked whether the buyers should have simply not bought these leasehold houses in the first place.
“Well, that would be true were it not that buyers have also used the developer-recommended solicitors and very likely the developer-recommended mortgage advisor as well. So the whole process of buying these new-builds has been made as seamless and easy as an impulse purchase at the end of a supermarket queue.
“There is absolutely no justification for a developer selling leasehold houses unless the developer does not own the land in the first place.
“There is not much justification for the leasehold of a flat, either.
“And you have got to remember that there are thousands of leasehold flat owners around the country who are paying very onerous ground rents as well.
“These onerous ground rents are a new development. This is a case of murky and anonymous investors, often based offshore, hitching a ride at homeowners’ expense through owning the freehold.
Sarah Montague questioned Mr O’Kelly saying that the justification for flats being leasehold was in order to manage them collectively.
“This is not true really. England and Wales uses leasehold for the ownership of a flat. But the rest of the world, including Scotland, doesn’t. England and Wales are out of step.”
What should be done about it, asked Miss Montague.
“Well, in the case of leasehold houses the government should stop the Help To Buy scheme and cease the purchase of these leasehold houses with onerous ground rents.
“These people are trying to buy homes, instead the developer is creating an enriched freehold which he is then flogging off to these anonymous investors. That could stop straight away.
“It is interesting that mortgage providers are not issuing loans on these properties.
“So, actually, the developers in their greed and venality have created a mini housing crisis here which might involve 100,000 people.”
Is this not a historical issue now that the government has said it will intervene and Taylor Wimpey has said it would stop leasehold house sales, Miss Montague asked.
“Well, it is not that historical. Loads of other developers are selling leasehold houses.
“But it is very bad that the government was not alerted to this by their civil service, or indeed by the government quango the Leasehold Advisory Service. It has taken a minnow like us who have had to blow the whistle on this.”
So, what should be done, Miss Montague asked.
“Leasehold houses should not exist. People are trying to buy a home. It should not be the sneaky creation of an investment asset class at their expense.
“The wider issue of whether leasehold should continue and be perpetuated in this country is another question. But the rest of the world manages the ownership of flats in a far more harmonious and less exploitative way.”
Related posts:
71% of leasehold house buyers used developer recommended solicitors
Gavin Barwell: ‘No excuse for leasehold houses or punitive ground rents and we will stamp them out’
BBC R4 You and Yours reports MPs saying leasehold houses are a ‘national con’
Now Daily Telegraph wades into the leasehold house racket
Taylor Wimpey more greedy than the ground rent ‘Mr Smallweeds’ (and so are other plc housebuilders)
The Sun demands end to ground-rent rip-offs
I bought a Redrow house last year and asked to purchase the freehold but was told I couldn’t. There are over 600 houses, all on leasehold and they are still been built. Should I have been allowed to buy the freehold?
Legally it’s after two years of ownership. Don’t be surprised when you ask to buy it at the end of the two year term Redrow have already sold it to Adriatic land (insert number here) where abouts in the U.K. are you?. Did you use the help to buy scheme and or use the Redrow conveyancing service?.
I am in Hartford, Cheshire. Didn’t use the help to buy but did use their conveyancing.
Will they only sell when all the houses have been built? Houses are still being built and they are likely to continue building for a couple of years. I’m hoping my 2 years are up before then. Is there anything I can do in the meantime I.e. Ask them if I can buy the freehold and ask if they are intending to sell to Adriatic Land..
Presumably you purchase the freehold before two years of ownership if the freeholder agrees ?
Oh yes, they are all still building leasehold.
Also I am very sceptical about Taylor Wimpey saying they don’t build leasehold anymore.
Clever words I think.
If I remember correctly, and apologies if I am wrong, but I am sure that TW said they would not build anymore leasehold on BRAND NEW SITES, THAT HAD NOT YET COMMENCED @ January 2017.
To me, that means that any sites that are “in progress” prior to January of this year could still be at leasehold level.
People need to tread very carefully, although I would hope that, unless TW reach a satisfactory conclusion with all its affected customers, people will walk away from all TW new builds
Don’t forget the numerous owners of Retirement Properties who are also caught in this scandal. In my own case my small one bedroom flat had an initial Ground Rent of £550pa, not an inconsiderable sum for someone in retirement who has little chance of increasing income to cover sums such as these. The Ground Rent is reviewed.
every seven years and is calculated using the formula: Initial Rent x Operative Figure divided by Current Figure. No I don’t know what it means either! Although this formula is in the Lease it makes the actual sum difficult to predict and leaves the way open for large increases to be demanded every seven years. My present Ground Rent is now £655.86pa. This is on top of a not inconsiderable Service Charge. As the original term of the Lease was 125 years it follows that we pay more for less. A ‘heads I win, tails you lose’ situation in favour of the Landlord, whom I now believe to be AVIVA though it was Churchill Retirement Living Ltd, when the property was built 9 years ago.
I have related the foregoing to my MP. in February 2017, who has requested comments from Spencer McCarthy of Churchill and the Housing Minister Gavin Barwell MP.. To today’s date neither has replied to his request.
Rosemary,
Churchill Retirement was founded by Spencer McCarthy out of the financial wreckage that was the old McCarthy & Stone.
And like the old McCarthy & Stone with Peverel, Churchill Retirement use a connected company as managing agents (Millstream) which creates a conflict of interest between the interests of residents and the Churchill Retirement bottom line.
Incidentally, McCarthy & Stone have just announced a 25% drop in profits(which they blame on Brexit!
Clearly it has nothing to do with customers realising what a poor and very expensive investment purchasing one of their apartments has turned out to be?
The Ground Rent is reviewed.
every seven years and is calculated using the formula: Initial Rent x Operative Figure divided by Current Figure.
What an earth is the above supposed to mean in a lease. Can anyone expand on this.
Perhaps a legal representative from one of the prominent builders involved with leasehold houses or even LEASE might like to respond
Please: do not be deceived by the suggestion that you can buy the freehold in two years. It’s a trick. And the exact opposite is the case.
You can buy the freehold on day 1 via a freehold enfranchisement. It cannot be sold without your being given a right of first refusal to purchase it. It can be transferred to an affiliated company provided that company has been owned for two years by the landlord, and shares in that can then be sold. It’s a perfectly legal way to cheat you out of your right of first refusal.
If two years is mentioned you can be sure that the company intended to own the freehold has already been set up and tjat the freehold will be transferred to it on the first day that it is legal to do so.
Paul,
To avoid confusion over purchasing a freehold.this is what I understand is the case.
A freeholder can sell the freehold to whomsoever they choose at any point, be it to the leaseholder or third party investors.
That said, a leaseholder can only legally demand a freehold is sold to them after a period of holding the lease for two years.
This applies to any investor who owns or has purchased the freehold.
It is unfortunate that the cost of purchase of the freehold can be artificially increased by simply increasing the ground rent premium or inserting onerous terms.
Michael, I defer to your knowledge if the requirement to have owned for two years is correct; I had forgotten. However, I do know for certain that the bypass of the right of first refusal I outlined, via a company owned for two years, is used routinely — as I and many others know from first hand experience.
The freeholder could have sold the freehold on day 1 but chose not to because there are people who will pay good money for the right to fleece people. It’s not so different from the kind of tax farming that used to go on in feudal times. It’s predatory capitalism plain and simple.
Paul,
The well known use of connected companies is very easy dodge to avoid leaseholders Right of First Refusal, which does not apply to leasehold houses.
What are the local MPs doing about this situation ? There must be many locations where leasehold houses have been sold and have this problem ?
Who is the MP for Clitheroe ?
Ollie, if you google your question it will advise that it is Nigel Evans, MP.
You can also go on his web site to send a message etc.
Due to Parliamentary rules, he can only assist people living in the constituency of Ribble Valley