Taylor Wimpey has undertaken to cease building revenue generating leasehold houses from January 1.
The announcement comes in a letter to LKP MP patrons Jim Fitzpatrick and Sir Peter Bottomley, and was made before the All Party Parliamentary Group meeting last Wednesday.
Taylor Wimpey says that it sold leasehold houses in the North West, a “small number” of sites in Yorkshire and where the developer does not own the freehold.
“… whilst we believe that the practice is normal and reasonable, standing back, we are able to change our practice so that we will make future sales of houses on a freehold basis on any new sites that we develop …
“Whilst we expect this that this may mean a small increase in sales prices on previously leasehold sites, it will enable us to offer a consistent, simple product to all customers. We will be making this change from the beginning of 2017.”
At the APPG last week, retirement housebuilder Bob Bessell said he had never introduced ground rents and believed them to be wrong. He also said that the market would establish the price of property and doubted that properties without ground rents would sell for much more.
Taylor Wimpey is continuing to “review” what to do about thousands of former customers who bought properties with doubling ground rents between 2007 – 2011, often with the advice of solicitors recommended by Taylor Wimpey.
In the letter below, Taylor Wimpey seeks to justify the policy, which caused controversy in London with some would-be buyers pulling out.
LKP is unaware of any Taylor Wimpey London sites which attempted to sell with these exploitative ground rent terms.
Taylor Wimpey claims the doubling ground rents were introduced in March 2007 when “historic RPI had averaged 5.9% over the previous 50 years”.
“The inflation implicit in the first fifty years of these rent reviews was 7%.”
This prompted Patrick Collinson, Money of the Guardian, to tell the APPG that pensioners getting 7% on their investments would consider themselves very fortunate.
The doubling ground rents raise the revenues from £295pa to £9,440pa.
He reckoned an increase to £700 would be in line with modern RPI.
“We have reviewed the detail of the lease concerned and are satisfied that the rent review policy is worded simply and clearly in the contract and is contained prominently in the first clause under the rent review heading. All customers have independent legal advice and we would expect all solicitors to explain the terms of any rent review to their clients.”
58% bought their properties using the solicitors recommended by the developer.
When asked whether the solicitors highlighted or indicated the ground rent terms, most replied “no”.
All respondents claim solicitors did not inform them that the ground rent terms could affect resale values, as legal practitioners are obliged to do.
25% bought through the taxpayer-backed Help To Buy scheme.
LKP is sharing this data with civil servants in the DCLG.
Taylor Wimpey says that “we believe that these leases were clear and were also reasonable in the context of when they were introduced in 2007”.
However, it acknowledged that there were areas where “leasehold can be improved”.
As well as the doubling ground rent scandal, Taylor Wimpey London has had to readdress sites where residents’ management companies embedded in the leases were incorporated under the sole ownership of Chainbow property management.
This company belonged to Roger Southam, now an employee of Savills – which bought Chainbow – who is also chairman of the taxpayer-funded Leasehold Advisory Service.
Taylor Wimpey’s statement can be read here: