The forthright CEO of the Chartered Institute of Building has again criticised the UK’s plc housebuilders this month.
He references Bovis admitting paying its customers to occupy unfinished homes to meet year-end sales as well as the leasehold house / ground rent scandal.
The article can be read here
In February Mr Blythe criticised the housebuilders for “legalised extortion” over leasehold houses.
Mr Blythe references Taylor Wimpey’s £130 million mea culpa pay-out, but doubts that will be the last of it. He also believes other builders will be named and shamed.
“Likewise, the recent announcement by Taylor Wimpey that it is making a £130m provision due the leasehold contracts issued between 2007 and 2011 to cover the “unintended financial consequence and concern that they are causing” is likely to come back and bite the company.
“These had ground rents that doubled every 10 years. Then you tie that in with its policy of shifting the freeholds on as soon as possible to “third parties”, with the rights of leaseholders to buy the freeholds seriously degraded.
“To say this is unintended does push the bounds of credulity. In a recession, these were a way of selling today and getting the profit back in future by securitising the freeholds. The last thing an investor buying the freehold wants is a patchwork of properties, some they own and some they don’t. So it makes sense to use loopholes in the law to frustrate the leaseholders.
“Taylor Wimpey is not the only housebuilder doing this but, as this “national scandal”, as MP Peter Bottomley described it, rolls out then it will likely be named.”
Mr Blythe ends by quoting former Conservative MP Andrew Selous:
“The Conservative MP Andrew Selous told the APPG in April that leaseholds were despicable. He said: “For me, this is a spivvy financial director dreaming up on a wet Thursday afternoon how developers can get another stream of income. We should not be treating homeowners in this way, and I think it is absolutely disgraceful.”
“Many would agree. But with unsellable leaseholds becoming more prevalent, we are fast approaching the moment when the comparison with the prawn sandwich becomes a reality.”
In February, Mr Blythe criticised the “relatively recent practice of shorter leaseholds with increases in ground rent included in the contract not properly explained or hidden”.
He added: “… freeholds get sold and passed on to speculators who either impose big ground rent increases or charge a fortune for the freehold to be bought out.
“There is no real reason for this practice other than house builders taking advantage of buyers desperate to get on the home ownership ladder.”