First-time buyers are contacting LKP after finding that they cannot sell leasehold houses or flats which have draconian ground rents introduced by plc housebuilders.
An epidemic of leasehold houses is now being built across the country, with a heavy concentration in poorer regions, such as the North West.
LKP reported earlier this week that £1.9 billion of leasehold houses were built last year, according to the Land Registry.
So far this year, the figure is £775 million, but this can be a misleading figure as properties can take six months to be registered.
Today the Guardian Money for the fourth week continues its campaign over leasehold scandals, which was initiated by case studies and data provided by the Leasehold Knowledge Partnership.
This has included the ground rent scandal surrounding Blythe Court and last week the newspaper looked at the devastating ground rent escalations in leases by plc housebuilders such as Taylor Wimpey.
It is obvious to LKP that not only is there an epidemic of leasehold houses being built, which should have ordinary freehold tenure, but that they often come with devastating ground rent increments.
Both The Guardian and LKP have been deluged with owners of new build houses and flats where the ground rent doubles every ten years making them very difficult, if not impossible, to sell.
The fact that plc housebuilders have stuffed their own customers in this fashion is absolutely astonishing.
Two Taylor Wimpey customers have got in touch with LKP to claim that their properties cannot be resold because of the onerous ground rent terms.
In one case a solicitor has taken the usual step of writing to Taylor Wimpey saying that two purchasers have pulled out owing to the ground rent doubling every 10 years.
Clair Scott, whose leasehold house is in on estate of 50 at Taylor Wimpey’s Silver Birch Close in Lostock, Bolton, claimed her buyers pulled out in September because of the ground rent terms.
“Our buyers had ordered furniture, booked in decorators, the works. They signed all the contracts and a few days before completion their solicitor read the lease properly and spotted our ground rent clause: £295 per year, doubling every 10 years until the 50th anniversary.
“The solicitors advised our buyers not to touch the house as it was unsalable in the future, given that by 2060 ground rent on this £200,000 mid-terrace three-bedroom house would be £9,440 per year!
“The house sale fell through as you can imagine and all parties involved are devastated after losing a lot of time and money.”
Mrs Scott claims that half the houses at Silver Birch Close have these onerous ground rent terms, while those bought after January 2012 have leases where the ground rent increases linked to RPI.
Mrs Scott also claims that many on the estate, including her, were not offered the right to buy the freehold.
These were sold to UK Ground Rent Estates Limited, where the ground rents are managed by Forte Freehold.
“We have no idea what we can do,” said Mrs Scott. “We are trapped by this God awful house with a lease that we can’t sell.
“We are first-time buyers, as are lots of others.
“We used Taylor Wimpey’s recommended solicitors and the key messages were: we can’t paint our door for two years and we can’t have livestock on the land.
“All daft stuff. Not: ‘By the way this is a hellish lease that will potentially cause you a lot of financial trouble and inability to sell in the future’.
“As a 25 year old first time buyer I did not have had a clue whether this was normal or not.
“Besides Taylor Wimpey is a massive plc company, surely? How can this be right?”
The cost of an extension at Silver Birch Close
Permission required from freeholder to make alteration to the property
£110 to forte freehold (manage things on behalf of UK Ground Rent Estates UK, the freehold owner) for initial request to make alterations
£187.50 plus VAT for a surveyor (initial fees) required by freeholder, paid by resident
£500 plus VAT for surveyor report required by freeholder, paid by resident
£200 Freeholder’s admin fees
£480 plus VAT in solicitor fees
The second Taylor Wimpey customer is the wife of Sean Greenwood, who sent a letter to all the MP members of the All Party Parliamentary Group on leasehold including its chairman and LKP patron, Sir Peter Bottomley. LKP is the secretariat of the APPG.
Mrs Greenwood, also a first-time buyer, paid £101,000 in 2010 for a new two-bed flat in Gornal, Dudley.
“We are suffering from something that is close to your heart: a greedy freeholder with a punitive lease that prevents us from selling our apartment,”
Under the Greenwoods’ 125-year lease the ground rents double every ten years starting at £250 ground. In three years’ time it will be £500 a year (on top of £840-a-year service charges), rising to £8,000 from 2059.
Mr Greenwood estimates that over the life of the lease the freeholder raise £21,672,000 in ground rent from the 32 apartments.
There will, of course, be other income streams: management, insurance commissions, lease extensions, subletting and building consents etc.
This is a spectacular income from a freehold that Mr Greenwood believes was bought for £138,000. He also claims that the freehold was never offered to the leaseholders.
“Our apartment is only six years old and built by what we thought was a reputable national house builder Taylor Wimpey,” says Mr Greenwood. “How can it be worth nothing?
“And how can freeholders be allowed to fleece residents who are essentially held to ransom, not able to sell, so forced to live there forever and pay the spiralling ground rent charges?”
He claims that sales at the 32-unit site have fallen through as mortgage companies refuse to lend on properties with such high ground rents.
In September solicitor Donna Croot, of Talbots Law, was instructed by another owner to inform Taylor Wimpey that two buyers had pulled out of purchasing the flat because of the “excessive rent review clauses in the lease”.
In both cases, the aggrieved owners claim they used the solicitors recommended by Taylor Wimpey to purchase their homes.
Mr Greenwood told MPs: “My wife was duped into buying the apartment then sold down the river by Taylor Wimpey to the greedy freeholders who simply see the residents as a cash machines.”
LKP is still waiting for a response from Taylor Wimpey on these cases, which were also reported in the Guardian.
A statement from Taylor Wimpey to the newspaper reads: “We can’t comment on this particular situation as we do not know the details of how the valuation was arrived at. However, it should be noted that Taylor Wimpey does not own the freehold for this development.”
Leaseholders at other sites have contacted the Guardian.
Last year Martin Mellors and his wife bought a newly built detached house in Botley, on an estate on the edge of Oxford with flats and houses built by Bovis Homes.
The Mellors knew it was a leasehold house but were reassured by the long lease.
‘Bovis said the freehold would cost £4,000. A year later it’s £15,000-£35,000,” the Mellors told the newspaper.
“We weren’t told until we were putting a deposit down that the property was leasehold.
“We almost pulled out but were offered assurances (to the effect that the lease is 999 years, the development will be managed by Bovis so they have a long -term interest in quality and ensuring ‘good behaviour’, and that all properties were being sold this way and it couldn’t be changed.”
A few months later Bovis sold the freehold to Gateway Property Management, one of several ground rent companies based in Southend ,“thus negating some of the assurances we were given at sale”.
The ground rent is £250 a year, rising with RPI, and more expensive houses on the estate were in fact sold freehold.
Bovis told the newspaper: “Out of respect for customer confidentiality we cannot comment on individual purchases, but as a business it is our standard practice to sell our new houses on a freehold basis.
“In those extremely rare instances where this is not the case, this could be down to a number of local factors, such as building on a consortium site where conditions have been put in place as part of the land purchase. Throughout any house purchase customers will be kept fully informed of the sales process and structure, by our own teams and should also be advised and updated by their own solicitors.”
Gateway, based in Southend, Essex, runs GroundRents.co.uk. According to the website, “we act as strategic partners to property developers” by “releasing the value in their ground rents” with “leases that maximise their worth”. However, it adds that “we also take care of the leaseholders’ interests after sales”.
Other cases are referenced in the Guardian.
One reader says she purchased a Persimmon new-build in December 2015. She claims: “The word ‘leasehold’ was not used until very, very late in the process, which was fast-tracked due to delays in building and my move-in date.
“I studied law at university and am interested in contracts, so I was shocked to finally be told that it was leasehold when I was already emotionally invested in the property and had booked my moving-in van!”
Persimmon is quoted saying: Persimmon said: “The type of property, freehold or leasehold, is discussed clearly with each customer prior to purchase and is described on every reservation form. Customers are under no obligation to use a solicitor known to Persimmon. We recommend solicitors who have knowledge and experience of a particular development. This improves speed of service for the customer, and can sometimes reduce costs.”
LKP has asked Taylor Wimpey to comment on the first two cases mentioned here.
Related posts:
Bottomley tells Taylor Wimpey to explain ‘sharp practice’ ground rents – and asks for names of directors who approved them
Taylor Wimpey more greedy than the ground rent ‘Mr Smallweeds’ (and so are other plc housebuilders)
BBC R4 You and Yours exposes Taylor Wimpey buyers facing doubled ground rents to £500 before 10 years have passed
Taylor Wimpey rejects responsibility to resale buyers facing doubling ground rents
Taylor Wimpey CEO to meet MPs over ‘cancer’ of doubling ground rents (which were deterring astute buyers in 2007!)
Taylor Wimpey woes reported in Estates Gazette
Taylor Wimpey and Persimmons are both very reputable companies which advocate a high standard of Customer Care.
I am sure when they read of some of their customers predicaments they will be sympathetic and try to resolve the situation in a fair and reasonable way.
I have previously suggested this could be done by assisting those unfortunate customers to buy the freeholds or by buying the properties back at a fair price.
They can then either resell them or rent them out.
If they consider the Ground Rent terms they initiated in the first place to be reasonable then there should be no problem.
Perhaps they would like to come onto this website to give their views or suggest an alternative way to resolve this issue in a fair and reasonable way.
I have to totally disagree with MH. How can Taylor Wimpey and Persimmons be reputable companies when they get involvedvwith lucrative leasehold scams..
How can they say they abdicates a high standard of customer care. Come on MH, face the facts of what these disgraceful companies are today, not how they usef to behave a million years ago
My experience of Taylor Woodrow, having worked for them for 22 years up to 1995 was that they were a very public spirited company.
Maybe things have changed, but I hope they both take what I intended to be constructive suggestions on board.
Do you have any better workable suggestions.
MH, you need to face the facts. Your experience was up to 1995, over 20 years ago. I have first hand experience of how they are no better than the worst in the last 5 years. You ask me for my suggestions, why, if TW behaved correctly in the first place there would not be so many leaseholders now in despair
It has been pointed out to Peter (“Pete”) Redfern, the CEO of Taylor Wimpey, that Sir Frank Taylor would have taken “a low view” of these practices.
There is an assumption, possibly incorrect, that Mr Redfern knows something of the founder of this business.
Surely I am missing something. If anyone bought with solicitors and was not informed of this issue on purchase ,they would have a negligence claim against the lawyers. I don’t understand why claims are not being pursued against the lawyers even if they were recommended by Taylor. These lawyers still have a duty of care to their clients who purchased the leasehold house . To me this is by far the simplest route to take for compensation. I have a feeling that it could be that some bought and were advised of the issue , and proceeded regardless. These type of purchasers cannot name now and take the moral high ground and scream about foul play.
Somewhere in the documentation there will be references to rent and review periods.
It is very unlikely the lawyers have compromised themselves, although one in the North West did say at one point in writing to a buyer that the ground rent was £200, when it was actually less.
The Guardian is to be warmly applauded for sticking with this story.
Admin.
That is a serious allegation in stating that a lawyer did not act in best interest of their client in order to satisfy the developer. I think you guys should be able to dig from one leaseholder contact a copy of exactly what they were advised and we don’t need to speculate. If a lawyer did not act in best interest of client that is enough to bring a case against the lawyers.
I still believe that a test case needs to be brought against the lawyers.
It is not an allegation of any sort.
The lawyers can almost certainly demonstrate that they have pointed out the fact that there are grounds rents and that they rise with 10-yearly reviews.
What they have not done is say to these 25-year-olds: These ground rents are anomalous and so high as likely to render this property unsellable through estate agents as mortgage lenders won’t lend against them. Walk away!
On the other hand, other disputes with developers – such as when off-plan purchases were not completed owing to the crash – have been resolved when the issue of these developer recommended / mildly suggested legal practitioners was explored.
Michael Hollands is correct on the broad point: the best these owners can hope for is that public attention makes Taylor Wimpey sort them out (at some expense, as it does not own the freehold).
In commercial property it is just hard luck if a tenant signs a dud lease on an office block, say. In leasehold residential, ordinary homeowners take it very personally.
Are they to blame for their own predicament? I don’t think so.
These homeowners are first-time buyers who were wet behind the ears.
“These home owners were first-time buyers who were wet behind the ears” exactly! Homeowners do take it personally if they sign a dud lease. Very often there are offers ‘your legal fees paid” and one think it’s mana from heaven, one less thing to worry about. – and then one becomes a slave to it- literally.
That’s why the law makers need to be involved to protect “the people” from the remnants of this outdated feudal system. It should not be left to the benevolence of the freeholder who after all, may be an investor and see it as just another business contract.
‘Interested’, Many of these purchasers are indeed ‘ wet behind the ears” and have probably been ‘advised’ by a dodgy solicitor in the pocket of a developer.. I believe you fully understand why the victims have not brought a claim against the solicitors involved. They have possibly been intimidated. Harassed , threatened with gawd knows what etc….. Little do they know that it’s just empty threats. There are many seedy solicitors out there who sail very close to the wind and wet themselves when they know they have been Been rumbled…. I’ve got my eye on a Brighton based one. Who is not half as clever as they think they are….watch this space. It is the Developers, Freehold Portfolio Merchants and their crooked agents that need to be brought to book. NOTE: Most of the solicitors in the pocket of the large dodgy agents are dodgey themselves. I have evidence. DRAIN THE SWAMP!!!!
It is surely now time for the whole sordid business of Ground Rent title sales to be investigated, including the willful;role of participating solicitors acting for both sides.
Such investigation should not be confined to “new build” title sales, as there is a widespread racket taking place among the small group who buy up existing Ground Rent portfolios without the prior knowledge of qualifying long leaseholders [breach of right of first refusal], and a criminal offence under s.4 the LTA 1987 [amended Housing Act 1996].
This relates specifically to freehold residential premises constructed during the 1970/80/90s, with the majority of individual flats on 99 year leases and the number of years remaining approaching or already under 80 years, ensuring the flat owner will require to extend the lease. in the very near future.
This is a highly lucrative business for the unscrupulous “hard men” to whom Admin refers, and who on blatantly breaching the first refusal rights of qualifying leaseholders, then enter into the, consequently illegal, follow-on business of “informal” lease extensions,
It is through manipulation of sale and purchase agreements, aided and abetted by equally unscrupulous participating solicitors, that qualifying leaseholders are kept ignorant of such transactions At present, enforcement of leaseholder rights can only be obtained through the Courts at disproportionate cost and remains open to widespread abuse and gamesmanship through withholding of documents on the part of the “hard men” solicitor’s.
The sale and purchase of Ground Rent portfolios as outlined above is a major national criminal scandal depriving unwitting qualifying leaseholders of the material interest in their own leasehold properties. .
Enforcement of existing legislation and introduction of more punitive penalties is now essential to protect existing long leaseholders from having their property stolen underfoot by this latter day Rachmanist bunch of spivs and gangsters.
Admin is correct. Sir Frank Taylor would have taken a very low view of these recent practises, so would those who followed him at Taylor Woodrow.
However we are now at a new situation and I have suggested ways in which the unfortunate leaseholders problems can be solved. So Persimmons, Taylor Wimpey and others need to give it some thought, which is what I am encouraging them to do.
I have not yet seen any other useful suggestions, I think just strong criticism of them will not resolve it.
Have any groups of these house leaseholders been to the tribunal to get a fair price to buy the freehold under the 1967 Act?
Equally, have any of the leasehold flat owners featured tried to claim back their Right of First Refusal retrospectively under the 1987 Act so they can take over the freehold jointly?
It would be interesting to know if either of these readily available legal remedies have been brought to bear in addition to the general campaigning.
Check out Treeview Trading, Westbury Residential! Walpole Property Ltd, Railway and bicycle company, RCP Ltd. Freshwater. Romney Court Blog ( cry for help) Aaarrrrrggggh. Stop them!!! . As very interested so eloquently stated, Drain the swamp. This is a toxic set up. INVESTIGATE.
Peter Evans,
Plse see “Philip Rainey QC: Reform of the law is a duty…” above with comment.