“What on earth were they thinking? It’s the obvious question raised by the ground rent scandal at Taylor Wimpey. How on earth did the selling of homes with exponentially rising ground rents seem like a good idea? Why did no one senior at the company say, ‘This will come back to haunt us’?”
One of Britain’s biggest housebuilders has suffered a 24 per cent fall in profits after setting aside £130 million to address issues around a leasehold scandal. Taylor Wimpey said that pre-tax profits in the six months to July 2 were £205 million, down from £268 million in the same six months last year, although revenues rose 18.5 per cent to £1.7 billion.
So asks Patrick Hosking, veteran business commentator as Taylor Wimpey received a mauling when it announced its half-year results yesterday.
The company is owning up to a £130 million hole to shut down the leasehold scandal, which the government is now investigating.
It might be much, much more.
Business analysts assume Taylor Wimpey have this closed down. But its feeble response to the crisis – altering doubling ground rents to RPI ones for whichever customers happen to get in touch with its “Ground Rent Review Assistance Scheme”, is not going to be enough.
Leasehold house owners want the freeholds at the price originally promised, and for leasehold flat owners the thorny issue of a “fair” ground rent needs to be considered.
Given that ground rent is not “fair” – courts extend leases with statutory powers at minimal, “peppercorn” ground rents – this is going to be difficult.
The company has been dithering over this for months hoping for something to turn up. And the elections, disasters, Brexit, the weakened government all obliged …
Last week, the Government announced that it intended to ban the sale of leasehold new-build houses, and to curb any ground rent to a peppercorn rate. No other housebuilders have set aside a sum of money to deal with the consequences of these leases, despite others having sold homes using them, such as Bovis.
But now Sajid Javid is mounting an inquiry, and he knows he has to deliver. He has the means to do so: 45 per cent of Taylor Wimpey sales are supported by taxpayers in the form of the Help To Buy scheme.
Basically too many people have been cheated over this.
And so far, Countryside Properties plc – also up to its neck in this, as are smaller housebuilders – has not come up with anything at all.
As Mr Hosking writes: “The haunting is now in full swing, with the housebuilder confirming yesterday that the wheeze of doubling ground rents every ten years for 50 years would now cost it £130 million to put right.”
As for the stooge, developer recommended solicitors they “have less of an excuse. They were paid precisely to identify these kinds of contract details and to alert clients to the potential dangers. There is little evidence that they did so.”