And ground rents are £500pa on Bournemouth flats selling for £151,600
The Times today reports that retirement developer Platinum Skies, which has close links with prominent Tory politicians, inserted admin fees of tens of thousands of pounds in the supposedly affordable shared ownership leases.
Platinum Skies, chaired by former Tory treasurer and hedge funder Lord Fink, broke Ministry of Housing rules with lease clauses that made it harder and more expensive for the leaseholders to purchase more of their retirement flats.
In addition, the ground rents on the properties, which sold for an average of £151,600 were £500 a year – three times more than the limits UK Finance deems an acceptable rate for mortgages. Its members will no longer issue mortgages on leasehold properties where the ground rent is more than 0.1 per cent. Platinum Skies sold the flats with ground rent averages of 0.33 per cent of the initial value.
After The Times investigation by reporter Andrew Ellson, Homes England, which has doled out more than £15 million in grants to Platinum Skies since 2017, ordered the retirement developer to alter the leases at no cost.
A property developer with close links to the Conservative party put administration fees of tens of thousands of pounds into the leases of affordable housing for older people. Platinum Skies, which is chaired by Lord Fink, the former Tory treasurer, broke Ministry of Housing rules over a three-year p
Platinum Skies has said that the clauses were a “drafting error” and it had written to the leaseholders saying that the terms would not be enforced. It also claimed that its ground rents were similar to other retirement developers and that none of the purchasers had used mortgage finance.
It is an open question why the conveyancing solicitors involved did not alert purchasers to these terms, and whether they were part of a panel of firms recommended by Platinum Skies, as is common practice among house builders.
The Times adds:
“The Times has established that a network of Conservative politicians and supporters have been involved with Platinum Skies in recent years. In 2019, the business paid Conor Burns MP, a close ally of Boris Johnson and now the minister for Northern Ireland, £12,500 for 36 hours of consultancy work. Platinum Skies is based in Bournemouth, where Burns is an MP. The company, which is also known as the Affordable Housing and Healthcare Group, has three developments in the area.
“In 2015, Platinum Skies’s parent company also paid the Tory leader of Bournemouth council, John Beesley, for planning advice while Sir Geoffrey Clifton-Brown MP, the treasurer of the 1922 Committee, has invested in the company. There is no suggestion that any of the politicians influenced decisions to grant funding.”
Sebastian O’Kelly, of the Leasehold Knowledge Partnership, is quoted saying that he was disappointed to see senior politicians mired in a leasehold scandal. “It’s the corrosive influence of the over-remunerated property sector on politics,” he said.
Liam Spender, a commercial solicitor, leaseholder and trustee of LKP, is also quoted:
“Although the developer is under no legal duty, they should never have put these properties on the market with that sort of ground rent, it’s a commercial and moral failing.”
The Times quotes Homes England saying:
“It’s been brought to our attention that the conditions of our grant funding have been breached. The Affordable Housing and Healthcare Group must establish the full extent of the breaches and provide remedy, which we will expect to be urgently actioned. As with any case where there has been prohibited or unacceptable activity, we will issue appropriate sanctions.”
Under shared ownership rules, developers can sell 25 to 75 per cent stakes in retirement homes to eligible over-55s.
Buyers pay rent on the proportion they do not own but are entitled to reduce their rent by purchasing extra shares in the property in a process known as “staircasing”. Once buyers have bought 75 per cent, they no longer have to pay any rent. Homes England offers grants towards the cost of building the flats on the condition developers adhere to certain rules, including unhindered “staircasing”.
The Times reports:
“An analysis of 50 Platinum Skies leases issued between April 2018 and March 2021 found they all contained fees of up to 10 per cent of the full market value of the property every time the leaseholder wanted to staircase to a higher ownership level. The contracts also limited staircasing to 10 per cent at a time. This meant that someone who bought a 50 per cent share of a £400,000 flat but subsequently wanted to buy a further 25 per cent to stop paying rent would have to pay fees of up to £120,000. This is in addition to the cost of buying the extra stake and the normal legal, survey and stamp duty fees.”
Platinum Skies lease terms were criticised by others in the retirement housing sector:
Bruce Moore, the chief executive of housing association Housing 21, which also offers shared ownership, described the leases as “totally out of kilter” with the principles of the scheme.
He is quoted: “We don’t put these constraints in any of our leases because they’ve got no place being there. The idea of shared ownership is to allow people to get to the level of equity ownership that is right for them. Locking people in to frustrate the purpose of the service is contrary to fairness.”
Michael Voges, from the Association of Retirement Community Operators, is quoted by The Times saying:
“This case highlights why we need more consumer protection in this area, which is long overdue and something genuine operators would warmly welcome.”
In a statement to The Times, Platinum Skies said:
“Following an internal compliance review in April 2021, we became aware that our Older Person Shared Ownership leases contained clauses relating to staircasing rights that were not fully compliant with Capital Funding Guide requirements. The inclusion of these clauses was made in error. We fully support the rights of customers to staircase.
“Work is under way to amend each lease and remove the relevant clauses, with all reasonable legal costs covered by us. We are also taking all necessary steps to prevent any reoccurrence of similar errors in the future. We care deeply about our customers.”
Conor Burns provided a statement to The Times: “My interests were registered in compliance with the rules of the House of Commons. My outside interests ceased on my appointment to government in July 2019.”
John Beesley denied any knowledge of the lease clauses to The Times but said he would condemn any practices breaking Homes England rules. He added that the work his company did for the business was properly declared and did not interfere with his work as council leader or the decision-making of the council.
Sir Geoffrey Clifton-Brown said his investments were historic and he had no knowledge of the leases.
After publication of the article in The Times, Sir Peter Bottomley, Conservative MP, Father of the House and a patron of LKP – with MPs Sir Ed Davey (LibDem leader) and Justin Madders (Labour) – praised the work of LKP in a letter to the CEO of the Charity Commission among others.
“This shows the public benefit of your campaigning and advice.”
Sir Peter also asked the CEO of the Leasehold Advisory Service whether it was aware of the Platinum Skies leases and whether it had alerted ministers.