But we will vary the lease to five years and one day, offers Gateway. But will that ACTUALLY satisfy lenders in future?
LKP refers case to Competition and Markets Authority
A teacher and his wife who bought their property off Bovis Homes in 2013 cannot now sell it because the five-year review of aggressive ground rent terms. In addition, the ground rent at £267 is well above the 0.1% limit of sales price beyond which lenders won’t issue mortgages to new buyers.
Paul Burke, who lives in a Bovis Home terraced house in Horfield, Bristol, has just lost his buyer, whose lender NatWest would not issue a mortgage on the property.
“I have since contacted Nationwide, HSBC, Halifax and Barclay who have also refused to lend on a property with five-year reviews to the ground rent,” says Mr Burke, who shares the home with his wife and two-year-old child.
Similar issues are being addressed as part of the mis-selling investigation by the Competition and Markets Authority.
After Bovis built the property, it sold the ground rent to Gateway plc, a property manager and investment company based in Southend, in Essex.
Mr Burke has attempted to buy the freehold and extend the lease at this site, but has been rebuffed by Gateway. The issue may be complicated because although the property appears to be a terraced house, there are two garages on the ground floor, only one of which is covered by Mr Burke’s lease. It is therefore more likely that the structure is, in fact, a flat.
A lease extension could reset the ground rent to zero.
LKP has raised the issue with Greg Fitzgerald, CEO of the Vistry Group which includes Bovis Homes.
It said: “Greg has asked the team that responded to the CMA investigation to pick up this specific issue and to both investigate the concerns and engage directly with Mr Burke, so that the specific details and concerns relating to him as an individual are addressed. The team will keep Greg directly informed.”
A statement provided to LKP by Mikaela Teare, Gateway’s chief administative officer, reads:
“We can only address the elements of your inquiry which concern Gateway.
“We do not consider any income which increases in line with RPI to be either onerous or aggressive. The RPI index is widely used in Government and is in fact the measure upon which pensioner’s income is determined each year. Furthermore as you mention the ground rent is currently £257.00 per annum [we are now informed it is £267pa] and therefore in the region of 0.1% of the value of the property.
“What we find concerning is some lenders will no longer offer mortgage terms on properties with five yearly RPI rent reviews which places their borrowers in a difficult situation. This is a matter which should be taken up with the CML [now UK Finance] as other mortgage lenders will lend on the aforementioned rent reviews and this inconsistency ought to be reviewed to bring clarity to the sector.
“Gateway has always worked with its leaseholders in a constructive manner and in fact agreed a recent proposal put forward by Mr Burke whereby the period between rent reviews increases to overcome this problem for a nil premium.”
There are reports last week of plc housebuilders which sold aggressive ground rents to their customers attempting to put matters right. Redrow has moved from selling freeholds to their leasehold houses from 26x annual ground rents to 16x annual ground rents.
Until this issue is resolved, Mr Burke and his family will not be moving anywhere.
It is highly unlikely that he is the only Bovis Homes customer with a lease with a five-year review term.
In 2014 LKP LKP and Conservative MP Justin Tomlinson revealed Countrywide property management playing games with residents management companies in blocks of flats built by Bovis. This resulted in Countrywide being replaced by Gateway. (Neither outfit is a member of ARMA):