– Urgent issue for MPs of parliamentary group on leasehold next month
– Onerous lease terms in taxpayer-aided Help To Buy home purchases
– Ground rents doubling every 10 years from plc housebuilder
The disgraceful and increasingly widespread scandal of plc housebuilders selling leasehold houses is reported in The Guardian today.
The article, based on research by LKP, reports cases of leasehold houses from plc housebuilders having escalating ground rents that can reach £9,360 a year.
These houses are now unsellable as resales through normal estate agents and LKP is informed that mortgage lenders will not lend against them.
Worse still, many of these leasehold houses have been bought with taxpayers assistance through the Help To Buy scheme.
The Guardian quotes Justin Madders, Labour MP for Ellesmere Port and Neston, describing the situation as “morally indefensible”.
“I have had a number of constituents contact me, saying they were aware at the time of purchase that the freehold was extra. However, they didn’t know the original developer sold the leaseholds to private investors who have ruthlessly exploited the law to line their own pockets.
“The prices they have been quoted to buy the freehold have rocketed beyond any reasonable sum people can afford. I have found constituents are unable to afford the fees being quoted and there are extortionate charges associated with obtaining permission to alter the property. Just over £2,500 was quoted for permission just to build an extension.”
At Persimmon’s Agusta Park development in Yeovil, Somerset, two-, three- and four-bedroom homes are being sold leasehold.
The Guardian could find no prominent mention on Persimmon’s website, or in the brochure, that the homes were leasehold.
Here ground rents were £150, then £190, going up every 10 years using a formula linked to the RPI.
The sales staff were also repeating gibberish that leasehold houses are “virtually freehold”.
LKP successfully persuaded McCarthy and Stone to drop this nonsense term in the summer.
Persimmon is quoted saying: “Persimmon sells a mixture of both leasehold and freehold properties. As Persimmon has acquired other companies over the decades, it has inherited the freehold reversions of leasehold properties sold by those businesses. There are around three million leaseholders in Britain. All Persimmon leasehold houses carry an extremely long 999-year lease and customers are informed at purchase what type of property they are buying.”
LKP would say this statement is utter rubbish, including the figure of three million leasehold properties (the official figure used by government is 4.1 million).
Persimmon has chosen to build leasehold houses at sites across the country. This has nothing to do with inheriting freehold reversions.
Taylor Wimpey is quoted saying: “At Taylor Wimpey the vast majority of our houses are sold on a freehold basis. However, in a small number of developments, predominantly in regions of the country where it is common practice in the market, we sell houses on a leasehold basis. Throughout any sale process, customers are fully informed of the ownership structure of the home. If a customer is interested in such a property, the sales team advises them whether the property is being sold on a leasehold basis.”
LKP would say this, too, absolute nonsense. In no area of England and Wales is it “common practice in the market” to sell on a leasehold bases.
There are leasehold houses in South Wales former mining communities, which exercised the former MP George Thomas in the Sixties. There is a cluster of leasehold houses in Cramlington, in Northumberland, built in the Seventies.
Nowhere in the country is it a widespread practice to build leasehold houses.
The Leasehold Knowledge Partnership is determined to make leasehold houses top of the agenda for the All-Party Parliamentary Group on leasehold and commonhold which meets on November 16.
It has attracted 43 MPs and lords, and is chaired by Labour MP Jim Fitzpatrick and Tory Sir Peter Bottomley. Members include Sir Keir Starmer, Emma Reynolds and Barry Gardiner.
The Guardian reports Sebastian O’Kelly, of LKP, saying:
“It is disgraceful that plc housebuilders are building leasehold houses that ordinarily – and until recently – would have had freehold title. This is an erosion of the wealth of ordinary people to the advantage of the rich.
“Young people, after years of paying rent, finally buy a home and then find they are still, in fact, tenants – which is what a leaseholder is – with all the vulnerability that that implies.”
“The housebuilders are evasive over this issue and it beggars belief that the outrageous ground rent multiples come from household-name builders. There is no attempt to justify the adoption of leasehold tenure for these houses, which are not complex communal sites such as blocks of flats.
MP Justin Madders is calling for a ban on leasehold for estates of houses. “It is clear this system is being abused to drive huge profits at ordinary homeowners’ expense. There is no need for there to be leasehold properties, particularly those on an estate where the properties are mainly detached houses.
“They need to be banned – it may be a convenient way for developers to get extra profit from their building work, but once they get in the hands of these private equity companies the profit motive overrides any considerations that there are real people living in their homes, who are being asked to stump up eye-watering sums.”
Related posts:
Guardian sticks with new-build ground rent scandal, while LKP advises Persimmon home buyers to walk away
Persimmon sold leasehold houses for £50,000 more than same-size freehold houses at Harrow View West
Outrageous: Persimmon builds leasehold houses – for the never ending income stream
Leasehold houses scandal widens as developers face MPs
Surge in new-build leasehold houses with £1.9 billion sold last year
Terrys Mews right to manage fails for not knowing Peverel OM is now FirstPort
The answer to this is actually very simple. Make the “investment” in freeholds unprofitable. Leaseholders should be allowed to run their own management companies, appoint their own contractors and audit accounts. Ground rents should all revert to peppercorn. At the moment the law is too complex and too many loopholes tempting the “investor freeholder”.
Leaseholder! Most of what you say might and can be implemented by law. The only You cant do is just revert ground rent to peepercorn. How would you compensate that loss of income of GR which was usually paid for mostly by innocent investors? Generally GR is not some hidden charge . This simply does not work. These leaseholders must either buy the freehold or apply for a statutory lease extension which they pay for and GR reverts to peppercorn.
Dear Interested,
Those ‘innocent freeholder investors’ as you call them, are essentially, making their money out of the innocent leaseholder homeowner. Some of us innocent leaseholder homeowners are simply trying to get some quality of life living in our flats. While the freeholders entourage of solicitors and managing agents are concocting ways to maximise profit at our expense.
More often than not the fabric of the building is suffering and owner occupiers are driven away.
I have seen some horrendous cases of exploitation, the system cannot rely on self regulation and benevolence, it needs radical reform
Would you regard the Tchenguiz Familly Trust as an innocent freeholder?
Or the banks that financed the purchase of freeholds secured over a 150 year term?
Are the institutions that are currently buying up freeholds at a very reduced price innocent?
Are Persimmon homes selling what used to be freehold homes as leasehold doing this innocently?
Leaseholder
Read what I wrote. I agreed with you except for the fact the GR cannot be turned into peppercorn. That would never happen or work. There are many innocent freeholders who simply are out there to collect GR returns on investment without any shady management deals. By all means legislate against the management issues but you will never be able to take away the Ground rent. You can legislate for future development that GR must be nil.
Interested,
Could you venture an explanation as to why it is that when a leaseholder wishes to exercise their statutory right to extend their lease by 90 years, freeholders attempt to make it as difficult as possible to do this, but will happily suggest a deal, which apart from being financially crippling to the leaseholder (who may initially be seduced by what appears to be a saving. but also by entering into negotiations removes their legal protections?
Dear ‘Interested’
I think we both have the nous to realise that ‘Leaseholder’ was most probably referring to the greedy Portfolio freeholders E.G. PEVEREL and their Ilk who hand in hand with County Estate Mangement ripped off leaseholders to a staggering degree ( see LVT judgement 2011) The sooner strict regulation is administered to Freeholders and their puppet managing agents the better. Also, I strongly believe that these puppet ‘Directors’ that unscrupulous Freeholders use as a smokescreen for connected companies should be illegal- if it isn’t already. I have unearthed clear evidence of this happening and it is
‘Interested’ I I would suggest that ROMNEY COURT’ leaseholders whose Freeholder is ‘Treeview Trading’ who was also CEO of County Estate Management, who are now WESTBURY RESIDENTIAL LTD’ would take issue with what you state.. I understand that CEM were removed by an LVT in 2009 for3 years.
‘Interested’ I I would suggest that ROMNEY COURT’ leaseholders whose Freeholder is ‘Treeview Trading’ who was also CEO of County Estate Management, who are now WESTBURY RESIDENTIAL LTD’ would take issue with what you state.. I understand that CEM were removed by an LVT in 2009 for3 years.
Dear Interested
I also have knowledge of ‘Westbury Residential Ltd’ being removed by RTM Parkside Birmingham in 2014 for alleged irregularities. It seems that the powers that be at which was formerly ‘CEM’ now Westbury Resi-are not willing to learn lessons and plough on with their Modus operandi…….
How about taking this to the extreme then – define Ground Rent. Which is payable to a Ground Landlord, not a licence to print. So to be pedantic only an actual Landlord can claim (Peers Etc…) not the lesser of the two types. As far as I’m aware there are less than 10 actual feudal Landlords left, could there be case for impersonating a peer of the realm? Worth a laugh
Dear Interested, With reference to Ground Rent, it is reasonable to reimburse existing landlords, though it’s hard to define “reasonable” in cases such as the likes of Blythe court and Martin Paine. Who is going to reimburse me though (and others like myself) for all the wasted service charge fees and years of atrocious management? Poor management is not just about high service charges. A poorly run building affects the quality of life of everyone who actually has to live on the premises, rather than view it as a cash cow. The Law makes no allowance for such niceties, but is quick to defend the freeholders ‘interests.’ I would also say that those who invest in freeholders don’t do so just for the ground rents, ample opportunities exist for service charge exploitation and contract manipulation. It is a corrupt and outdated system, and I really cannot see how it can be justified any more.
How about Conveyancers actually being taught Land & Property Law? No two Leases read the same. Who even allowed this mind set to evolve? A non-disclosed cartel formed back in the 1980’s did all this. The Lands Tribunals have been manipulated from the outset. The major bone of contention here is the term Tenant. Tenants are the Equity paying the weekly or monthly rent whereas the Lessee owns the Equity. None of this matters even when supplying a satisfied Structural Surveyors Report to signing for the Mortgage. Once signed you are then deemed a Tenant without any of the protection. Charges are being placed over the whole of the building without sight seen by the Conveyancer to Leaseholder. This ultimately is what the Lessee is paying for. What a fab way of running an extortion racket including a spot of money laundering…
Totally agree – the ability to create such residual incomes at the expense of the Lessees Dwelling is immoral. Due to the boom & bust years of the 1980’s a new breed of business person has emerged from the ashes of war torn sites prime for development.
E&J are the trading arm of Eyre & Johnson Solicitors (SIC Code applied for 2005) Ltd at the root of which is a long struck off Solicitor. This cartel are deeply embedded with a number of Developers. Bellway have been systematically changing their name to form part of the E&J Gp.
Fernwood Village – Newark
Local villagers are being charged by Firstport Property Services Ltd, a property management company for keeping pets, planting trees, having solar panels and changing their mortgage provider. Firstport Chief Executive Officer is Nigel Howell same CEO of Firstport Retirement.
A maintenance strategy group set up by Fernwood Residents’ Association and the parish council has taken its concerns to Firstport Property Services.
Firstport’s company’s charging policies have been raised at Westminster by Newark MP Robert Jenrick, who wants the issue to be debated in Parliament. Residents claim charges they knew nothing about included tenants of rental properties being asked to pay £76 to have a pet.
It is claimed that if their contract with FirstPort specifies it, those owning the freehold or leasehold on their properties who wish to change mortgage provider have to seek permission from the company first.
The cost associated with re-mortgaging a property was set at £138 in April, an additional fee to those required by a mortgage adviser or lender.
Home-owners must pay £300 to FirstPort if they want to alter their own properties by, for example, adding solar panels or a conservatory.
Alterations carried out without the prior consent of FirstPort incur a fee of £424.
The charges are on top of a standard maintenance fee paid to FirstPort by Fernwood residents, which covers grass-cutting in public open spaces and sweeping parking bays.
Mr Jenrick said: “The heart of the issue is the charges levied against freeholders for doing simple things that homeowners normally take for granted, such as re-mortgaging or adding solar panels or a conservatory. The existence of these charges is a disgrace and they are set very high.
“FirstPort is profiteering from a model that should not exist and needs to be stopped.”
Charles, have a look at the First Port website, Property Insights
An article by Sue Petri.
She states that their staff are First Ports greatest asset and 8% of First Ports expenditure is spent on their training and development.
No wonder the cost is so great with the turnover of staff they have.
I wonder who eventually gets charged with this cost.
For anyone wondering where the money goes: See this story on grouse shooting estates (https://www.theguardian.com/environment/2016/oct/28/grouse-shooting-estates-shored-up-by-millions-in-subsidies).
The super-rich way to profit:
1. Collect extortionate ground rents
2. Charge huge fees to the nouveau riche to shoot grouse (.ie., those who can’t afford their own grouse moor)
3. Collect EU subsidies
4. Donate a few tax-deductible shillings to obliging parliamentarians who will dance for coins; remind them that some leaseholders are employed as beaters
Lovely jubbly!
Well said!
Leaseholder I agree with you. There are unscrupulous folk out there who have a freehold portfolio and rip off leaseholders. They use to their own ‘ Managing Agents’ contractors from associated companies and attempt to bypass the s20’Legislation by deeming works ‘ urgent’. I am fortunate in that I have a share of the freehold and no matter how puppet like and dim witted the directors are… I can still take the offending agent to task.. Take these people on and don’t be bullied. They are mostly talking absolute balderdash!
Did First Port use to be ‘Peverel’..? Who got the back of its legs slapped along with CEM in 2011? ‘ see LVT ruling. Extraordinary.
Interested Leadeholder
Yes, ‘First Port used to be Peverel and County Estate Management’ which went into liquidation in 2011 after the Lvt ruling is now ‘Westbury Residential’ with the same CEO/ Directors………….