Gavin Barwell, the housing minister, said yesterday that there was no excuse for leasehold houses or onerous ground rent terms, and the government was going to stamp them out.
Speaking at the “annual conference” of the Leasehold Advisory Service – in fact, a trade show for professionals employed in the leasehold sector who pay £350 to attend – Mr Barwell said:
“The Leasehold Knowledge Partnership estimated that around 9,000 houses are being built and sold as leasehold. Many of those seem to exist only to create an income stream from the ground rent.
“These practices are not technically wrong, but I think there is a gulf between the letter of the law and our common sense about what is right. Some of the cases that we have seen in the media have highlighted some truly appalling behaviour.
“This is not just one company going rogue. A number of the larger developers are involved in it and I think they would do very well to remember that they are building homes for people to live in, and not investment vehicles for financial institutions.
“Except in a very few exceptional circumstances, I cannot think of any reason for houses to be built on a leasehold basis.
“The government is determined to stamp out unfair, unjust and unacceptable abuse of the leasehold system.
“I very much welcome Taylor Wimpey’s announcement that it will not sell leasehold houses on its new sites from now on.
“This shows that a developer is being proactive in responding to questions asked of developers about the new leasehold houses by the All Party Parliamentary Group for Leasehold and Commonhold, led by Sir Peter Bottomley and Jim Fitzpatrick MP. But more can be done. And I would encourage other developers to follow Taylor Wimpey’s example.
“But more needs to be done, not least to those people who have already bought such houses.”
Taylor Wimpey is currently completing a review into the period when it sold properties with doubling ground rents between 2007 and 2011.
It is unknown at this stage what compensation the developer is proposing to offer its former customers. Meanwhile, homeowners are uniting to consider class actions against the company, and the legal advisers Taylor Wimpey recommended.
“I very much encourage other developers to follow Taylor Wimpey’s example.”
The minister also considered onerous ground rents on new developments, and referenced on several occasions the Commons debate of December 20.
During it, Labour MP (and solicitor) Justin Madders referred to a leasehold house where the ground rent doubles every decade starting at £175 amounting to £367 million in 200 years’ time.
“That is an extreme case but it shows how important it is for developers to be transparent about ground rent reviews and increases in a lease, and the cost and implications that this can have on the purchaser.
“This practice cannot be allowed to continue and the government will stop it.”