The Nationwide building society – which is one of the top three mortgage providers in the UK – announced today that it will not lend on properties with doubling ground rent.
“Unreasonable multipliers such as doubling every five, ten or fifteen years not allowed. Escalation should instead be linked to a verified index, such as the Retail Price Index,” it says.
It adds: “In addition, the maximum acceptable starting ground rent on all new build leasehold properties will be limited to 0.1 per cent of the property’s value.”
For some unknown reason it also insists that the “minimum acceptable lease term on new build transactions (including office conversions) will be 125 years for flats and 250 years for houses.”
Why the difference?
In London, LKP is routinely seeing properties offered for sale with short 125 year leases and ground rents of £300, doubling or increasing with RPI at short intervals.
Obviously, we would urge ending ground rent altogether – it is for no service – and insisting on all new leases being indefinite.
However, we are delighted that Nationwide is addressing this which shows that the leasehold market is auto-correcting.
04 May 2017
NATIONWIDE STEPS IN TO PROTECT HOMEOWNERS FROM UNFAIR LEASEHOLD PRACTICES
Nationwide Building Society is taking steps to protect its mortgage members from onerous leasehold terms and escalating ground rents with a new valuation policy for new build leasehold properties.
The Society is the first major lender to impose fairer and more transparent lending conditions on these homes. For valuation purposes on all new mortgage applications on new build properties received from 11 May 2017, the minimum acceptable lease term on new build transactions (including office conversions) will be 125 years for flats and 250 years for houses.
In addition, the maximum acceptable starting ground rent on all new build leasehold properties will be limited to 0.1 per cent of the property’s value.
The ground rent must be reasonable at all times during the lease term, with unreasonable multipliers such as doubling every five, ten or fifteen years not allowed. Escalation should instead be linked to a verified index, such as the Retail Price Index. If the valuer believes the marketability of the property will be severely affected by unreasonable lease terms, they may decline the property, or reflect those terms in the valuation figure they provide to the lender.
Unfair leasehold terms and rapidly increasing ground rents have been the subject of much recent media, political and industry criticism, amid a drive to limit the practice of developers not only unnecessarily offering new build leasehold properties for sale but also in some cases the accompanying sale of those freeholds to third parties.
Robert Stevens, Nationwide’s Head of Property Risk, Data and Strategy, said: “As a mutual building society that looks to protect its members, we have decided to make changes to the way we value new build properties on a leasehold basis. We are doing this to address the practice of using leasehold tenure where this is unnecessary, particularly for new build houses, and to ensure that onerous leasehold terms, including ground rents, are properly considered and controlled in order to safeguard our mortgage members.
“Nationwide is taking a proactive, leading position on this issue to address a significant risk facing our members and to challenge what we believe to be poor practice in the new build market.”
The changes are limited to new applications on new build transactions from 11 May 2017 and will not apply to properties being sold second hand. It will apply to both Nationwide and The Mortgage Works (TMW) mortgage applications.
About Nationwide Building Society:
Nationwide is the world’s largest building society as well as one of the largest savings providers and a top-three provider of mortgages in the UK. It is also a major provider of current accounts, credit cards, ISAs and personal loans. Nationwide has around 15 million customers.
Customers can manage their finances in branch, on the telephone, internet and post. The Society has around 18,000 employees. Nationwide’s head office is in Swindon with administration centres based in Northampton, Bournemouth and Dunfermline. The Society also has a number of call centres across the UK.
Brilliant. At least someone is doing something to protect leaseholders. The government just need to get their act together.
Bellway sell their new builds on 150 yr lease. Which is the term of mine ( well actually it’s 142 yrs couse I lost 8 yrs).
From my understanding now is nationwide consider this a short lease and therefore wouldn’t of lended on it.
Bellway really need to start answering our concerns.
The term of the lease (RPI) may be considered reasonable but the short lease is not
This is a good question, and one Nationwide has fumbled to answer just now.
Nationwide has, and will, refuse to lend on some properties with onerous ground rents that are resales.
My guess is that it will increasingly refuse to do so following this statement.
It means people in Katie’s position need to get things resolved (ie buy freehold, if possible).
This is also putting a question mark over resales of Persimmon and Redrow properties, among others.
If i wanted to sell my RPI linked leasehold house with 139 yrs left on the lease the person purchasing it may not be able to get a mortgage for it ??
This would mean the house bellway sold me which they consider to be perfectly marketable is not !!.
Cheers bellway. And loads of other developers for the stitch up yet again !!!
The professionally qualified Managing Agent of our block of flats gave me a quote to extend the lease of either (1) £37k with peppercorn rental or (2) £30k plus a complicated ground rent structure that remained constant for the first ten years and then doubled and doubled again every 25 years. It was only when I sat down and worked out the offer that I realised that it came in at around £250k over the extended lease term. When I complained to the Lessor the hard-nosed and indifferent reply was the second quote was perfectly legal! A legalised scam more like!
I suspected that the second quote would lead to problems further down the line and the whole episode has revealed that the managing agent cannot be trusted to be an honest broker as he has entered into a form of gamesmanship that I consider to be unworthy of a professionally qualified surveyor. The saga continues as I have had to go to the expense of commissioning my own valuation expert to help me build a case for a lower premium.
I am glad that I was not duped into signing up to a non-statutory informal offer that included a doubling of the ground rent but I do wonder how many leaseholders of flats and maisonettes have been taken in by what appears to be on the face of it a cheaper offer but may in fact lead to problems at a future point of sale or remortgage if mortgage companies take a dim view of the new ground rent terms. If the data is not readily available perhaps LKP and the APPG could recommend that cost of every lease extension, the new lease term and any ground rent terms should all be registered with the Land Registry so that those in government can get a firmer grip on the subject and understand the extent of the problem.
Finally, well done to those who have highlighted the problem of ground rents that double every few years. Your hard work is starting to bear fruit and is much appreciated. A bug bear of mine is the extortionate cost of lease extensions which I believe is rooted in the way the law has been written but I will address that in more detail once my own case has been settled. Finally, finally, if anyone is tempted to sign up to an offer to extend the lease that includes a complicated ground rent structure, or any ground rent for that matter, don’t do it! And if anyone has signed up to such a deal then I recommend that you read some of the articles on this website and seek specialist legal and valuation advice as soon as possible.
Nationwide say ground rent should be restricted to 0.1% of the value of the property.
That being the case, who decides the value? It can’t be purely on the selling price as that includes a profit margin? Any thoughts?
My upstairs neighbour extended his lease to 100 years, an informal agreement. The ground rent is now £425 per annum when it was previously £15, and it will be reviewed every 10 years , increased by the rpi including legal costs which will be incurred no doubt by the leaseholder.The estate agent marketing the property said that the £425 was a fee for maintaining the garden etc when in our small block we don’t pay any managing fees. When asked if this high ground rent would put off any prospective buyers the solicitor just said no, it was just another bill. The flat was bought for cash, but even the buyer didn’t realise that the ground rent was so onerous. In under 20 years the 80 year rule will kick in and as the ground rent amount is part of the calculation imagine what it will cost to extend.again. People need to be educated about the leasehold system, not just ordinary folk, but professionals as well.
I raised this point about building societies having a responsibility some weeks ago. They should never have given mortgages on these properties in the first place.
They also should now be banging on the table and putting pressure on these builders to help those already affected.
Moving forward, I trust Nation W will be using their own “experts” to ve all future leasehold houses leases before oking a mortgage, BUT BUT BUT, better still why don’t they just kill it dead once and for all, just refuse to issue mortgages on leasehold houses, job done. If all mortgage lenders stuck together, leasehold house sales could be stopped overnight without waiting for timid government ministers to stop faffing about
Whilst i see this move as a positive one it does worry me what will happen to the thousands of leaseholders already stuck with oneourous and short leases when they come to re mortgage.
These lease terms will be considered “high risk” amongst lenders and therefore will probably come with a “high risk” higher interest mortgage rate. So yet again we have been shafted by the developers.
My 150yr lease from bellway will drop under 80yrs when I’m in my final years of life. So I best get saving for my lease extension now so i don’t leave my little boy with a house that is totoally worthless.
Obviously The enfranchisment route to purchase my freehold is the only way to get out of this diabolical situation.
Seriously how much money does someone have to throw at this before government intervene?
This leasehold system is like a bottomless pitt however my bank account isn’t !! Lol
It is unlikely that this Government will ever intervene, if the past 7 years is anything to go by.
Nothing will happen until well after the General Election, by which time we shall most likely have yet another new Housing Minister who has to start from scratch.
Over the past 7 years we have not had leasehold covered by every national media and we have not had an All Party Parliamentary Group on leasehold and commonhold reform with more than 70 MPs signed up.
The election will not affect this. I am hoping we can reconstitute the APPG on June 9.
It has never got to this point before.
We will continue to push this. The publicity and pressure must be relentless.
We will not give up. We have come too far.
Thank u to everyone who is putting so much time and effort into this. I for one know how much work has gone into this. It’s literally taken over my life !!!
To make any kind of change,one has to have the will and determination to do it.
We must put an end to this leasehold racket and stop allowing spivvy property vultures feeding off Leaseholders. This includes developers- Freehold portfolio girls and boys and their unscrupulous ‘Manging agents’. Oh and their dodgy solicitors. We must be relentless in DRAINING THE SWAMP!!
What is LEASE and the Council of Mortgage Lenders advising lenders ?
Help to Buy is dead in the water if other lenders follow the Nationwide and stop mortgaging on doubling ground rents with lease terms less than 999 years,. Existing Help to Buy and other lessees will be unable to remortgage and be put onto the streets and the taxpayer will lose large sums of money.
Why does the DCLG not have a brain and use its influence to stop unfair ground rent terms by refusing developers Taylor Wimpey, Persimmon, Linden Homes, Countryside Properties, Bellway etc any more Help to Buy monies. Billions have been lent and are at risk.
I hope the DCLG is just incompetent rather than something more sinister. DCLG and developers entice first time buyers with 5% deposits but give no advice on risk or information on lease tenure. The DCLG seems to have ignored LKP warnings and like Pontius Pilate wash their hands of any responsibility.
Lessees are not just to be fleeced but to be offered up as sacrificial lambs to be slaughtered on the altar of there is a ‘housing crisis’ let’s build more homes and stuff consumer rights.
If this development doesn’t wake up Government,LEASE and the DCLG nothing will. Madders who stated this is the next PPI scandal is closer to the truth than he can have thought possible.
Questions do have to be asked of the DCLG civil servants, and the Leasehold Advisory Service, why they have not alerted ministers to this crisis.
Why has it taken the efforts of a minnow organisation like ours to blow the whistle on this?
The explanation is of course obvious with discredited people like Roger Southam, chair of LEASE, who used to sell his services to advise freeholders how to “maximise ground rents”. LKP has called for his resignation.
The rest just seem determined to remain on the wrong side of this … but the political plates are shifting.
Let’s not get me onto the subject of Mr Southam. Who has clearly ignored my hand delivered letter on behalf of 3600 leasehodlers on 19th April urging him to step down immediately.
It’s a shambles.
Oh and then theirs my official complaint to housing minister about mr Southam conflict of interests. To which his response was poor.
This is not going away and neither am I!!
Mr Southam when u read this i hope the message is clear we will not access LEASE whilst u r there. It is not fit for purpose and neither r u.
Hear Hear. Let’s investigate the Nolan Principles and Mr Southam’s compatibility. I believe that you Southam are totally unsuitable to chair LEASE which is a tax payers funded quango. Let’s see how Savilles react when they are inadvertently dragged into this toxic issue….. You should go and go NOW! No skeletons can be hidden .
“PROPERTY DEVELOPERS LURE BUYERS WITH CARS AND IPADS”
See page 22 of ‘THE TIMES’ May 5th. Talk about desperate!! Maybe they think it will dissuade buyers from reading the small print re ground rent thievery??
PS . That was my attempt at irony!!
Great news if all existing leases have the unfair conditions removed by Government statute.
Terrible news for existing leaseholders if Government doesn’t reform leasehold.
The same types of property will have a different value depending on the date of purchase. More unfairness, more chaos and complexity.
Once the government gets a whiff of any sort of house price correction/fall/crash they will pull the last lever they have to keep the prices propped up and that will be to introduce commonhold.
One of the unique features of the campaign (which has never been understood by freeholders and their managing agents, is that the victims of leasehold are looking beyond their own personal interests. If current leaseholders are disadvantaged by an end to leasehold in the interests of those following them so be it! We will pay the price!
I agree with Mr Epstein. The determination and selflessness of leaseholders house and flat alike will bring an end to the leasehold racket and smash the spivvy operators who crawl around in the cesspit of cupidity. Let’s be relentless in our campaign to bring a halt to this injustice. Huge respect to LKP for its excellent work.
Where is the campaign other than here? I do not use facebook…
I come to this site regularly for hope! Meanwhile I await the party manifestos for any sign of firm commitments on leasehold reform.
For sanity sake I decided years ago that I would treat my fast devaluing leasehold literally as what it is: a long term rental agreement without expectation of much resale value (i.e. inheritance value).
I give regular leasehold advice on another forum and the stories presented are truly shocking – even where lessees have an RMC or a RTM company. They are fleeced on all sides. No argument. The DCLG civil servants and Mr Southam could maybe spend a useful few hours reading that forum.
Any statute that appears to give protection often turns out to be a chocolate fireguard (as does the lease) because higher courts have thrown up practical gotchas that the ace-value legal rights never predict.
As an ex public sector type who had responsibilities for ‘policing’ housing rights including leasehold, I was an idiot to buy leasehold but convinced myself the average experience could not be as bad as I witnessed in my work.
It is infinitely worse.
The last twenty years has seen removal of any remaining veil that it isn’t what it is: a free-for-all and effectively unregulated gravy train.
Ironically, in my time we never considered recommending prosecution of a freehold landlord. Leaseholders as ‘owner occupiers’ were advised to go see a solicitor. Not sure what anyone expected the solicitor to achieve.
I would not be surprised if a FOI revealed no freeholder has ever been prosecuted by an LA under the Acts? Recent higher court decisions have blocked even a consolation path to a civil remedy as apparently that would be ‘unfair’ on landlords. Who needs to worry about a few paper only criminal offences? In practice leaseholders have few protections. None that I would advise to rely on to take to a court, anyway.
But I suspect if you could think of a petition to add to the government site, few of the 4 million leaseholders would bother to sign it? In my local experience of RTM, few flat owners seem to want the burden of self management and prefer to live in denial.
Being sheep is a guaranteed way to be fleeced. But to be fair, it is also surely saner to bend with a powerful prevailing wind than try to fight against it and face being snapped in two with high legal costs and stress, etc?
The toughest fighter still needs a fair wind. I will continue to hope.
Interesting, depressing and also, somehow, encouraging. I’m interested to know what the other forum is.
It was put to me once that the option for leaseholders was: “If you don’t like it, leave.”
At the time we didn’t have RTM and it looked like our chances of achieving it weren’t that great as we couldn’t even identify many of the other leaseholders (the landlord was, of course, being unhelpful). But, we persisted.
I don’t have to write to my MP (I just did; I keep it to about once a year), share information with other developments, or up here occasionally.
Persisting seems the right thing to do and, actually, I think the cumulative pressure is beginning to yield results. I do worry a bit that reforms could be grudging, minimal and cosmetic, so feel that the pressure needs to continue to increase so that half-measures and token reforms will not be proposed or accepted. The fight after all is about fairness, the ultimate arbiter of which is public opinion. In the meantime, the reformers are each other’s greatest strength and can draw energy to persist from the visibly growing pressure.
I was surprised recently to read just how recently the notorious Mr Rachman caused various reforms to be enacted. He was before my time and I had somehow assumed that Rachmanism, the word coined for his abuses, was more ancient than was actually the case.
Do we need a word for the grotesque activities of Rachman’s successors? He was a low-life criminal with a reputation for inflicting violence on vulnerable tenants. The life-wrecking violence of his successors is achieved legally with small print and spreadsheets by educated people calling themselves things like “financial engineers” and helped by apparently respectable professional accomplices.
The only innovations of these predators are new rent-seeking tricks, conflicts of interest and ways around the law. They will not be restrained by smaller print. Only abolition of leasehold, and the prohibition and vigorous suppression of dehumanizing exploitation of others will do. It’s why leasehold tenure has simply been abolished everywhere else in the world.
The euphemism “fleeceholder” is far too gentle for these predators, one of whom vowed publicly to “butcher” his enemies. There’s quite a difference between a shepherd and a butcher who resells every ounce of flesh he can obtain without getting any blood on his hands–one who pays others to do the slaughtering, selling and remission of profits to his offshore bank accounts. It’s not financial engineering, it’s muttonisation, and it should be outlawed. It is unfair and morally repugnant. Persist! Loudly!
Paddy get with the Facebook / twitter programme and start a campaign on behalf of flat leaseholders. I will support it wholeheartedly.Look to the NLC as an example. If as you say leasholderds do not want the burden of self management and prefer to live denial -well good luck to them and if they are ripped off by cooked managing agents ( TOO BAD) . They had better wake up and smell the coffee. Alert me via this site if you want to start a campaign on behalf of flat leaseholders – walk the walk and not just talk the talk!!
Paddy I have sent up the national leasehold campaign facebook group. In four months we have 4000 members.
We are forming residential groups nationally with designated co ordinators organising their own estates and feeding back to the national group.
We are leafleting new build estates handing out leaflets to raise awareness.
We are organising demonstrations outside new build estates
We have had several MASS email events raising our issues with developers and government.
We have made an official complaint about roger Southam from LEASE
We have attended the APPG on leasehold reform and spoken at the APPG.
Many estates have instructed solicitors for both negligence cases against solicitors and also commenced collective enfranchisment.
We have given endless television and newspaper interviews. Rip off Britain will be broadcasting this Friday on leasehold.
We are keeping the pressure on as best we can. We are getting amazing support from LKP and Leasehold solutions.
Leaseholders are not happy and we are not going to stop until this issue is addressed for both houses and flats.
We are organising a demonstration in June at the housing conference in manchester.
Lots going on.
Put an early bird deposit on a persimmon home (detached house!) and they said the lease was 999 years £150 ground rent and frozen fpr 10 uears then goes up with the rpi (not sure they are the right letters) but still worring me … should i be worried and pull out?
Your “Early Bird” will end up being like a seagull with food poisoning!
If you proceed with the purchase you will shortly be dumped on from a great height!
Dixie, in the circumstances I cant believe you are even looking at a leasehold house.
Please please just DO NOT buy a new leasehold house. Why on earth do you need to.
Don’t forget it’s not jus ground rent costs. You have to get written permission to do almost anything to your home from the freeholder and all these things are chargeable and could cost thousands over the longer term.
If I had absolutely no option but to buy leasehold house I would not put down a penny or sign anything until I had been given a copy of the lease which I would give to a solicitor of my choice.
That’s another one of my pet rants – copy leases should be handed out by the builders sales staff to every enquirer, but we all know why they don’t!!
As I, and others, have said before, this “Help To Buy Scheme” is more than half the trouble. It can only be used on new build and the builders put their houses to leasehold sales, very clever.
It should be called “The Help To Sell Scheme For Builders”.
The “Help To Buy Scheme” (Taxpayers Money) should never have been allowed to be used to purchase leasehold houses in the first place.
These government muppets who thought up and introduced the scheme should be named and shamed, they are unfit for purpose.
I would not be surprised if government were not “in with the builders” when they introd the scheme, In the main, all it has done is helped builders to sell leasehold houses
PS .paddy you say ” The thougest fighter still needs a fair wind”. NO NO NO. Dertermination is what is needed. “Fair wind” be damned. No defeatist talk on this site please!
You see Paddy. Katie Kendrick has created a movement to fight against ‘ leasehold houses’. None of this ” Oooh I’m living denial’ rubbish. Get yourselves together and do something about it. Somebody must.gave cojones in the flat leasehold fraternity???
I have a question – I’m about to purchase a 1 bedroom flat as a buy-to-let investment. This is a one-off investment for me and I can’t afford to get it wrong.
The purchase price is 365k. The ground rent is £300 per annum which doubles after 25 years and then keeps doubling every 25 years after that.
This is a new conversion and the lease is 125 years.
This doesn’t appear to fall within the ‘toxic rents’ guideline that the Nationwide have taken a stand against, so should this be a concern to me?
I’m told that it’s quite usual. Should I still invest?
I am currently considering buying a 2 bed flat with a 999 year lease. It currently has a ground rent charge of £250 which will double every 10 years. My solicitor has highlighted the ground rent issue and I have renegotiated the price with a £35,000 reduction. Is this still considered a bad buy? Your opinions will be gratefully received.