Taylor Wimpey and the anonymous speculators in the Long Harbour ground rent fund have agreed to vary double ground rent leases to ones linked to RPI, it was announced this afternoon.
The announcement comes 11 months after LKP managed to get this issue to national attention.
The deal has been extended by Long Harbour, whose founder is Will Astor, to include Taylor Wimpey resale properties. That is, properties that have been sold on by the original Taylor Wimpey customers.
The initiative is the latest in a number of conciliatory manoeuvres by the developers and ground rent speculators to defuse the leasehold houses / onerous ground rent scandal.
‘Cameron’s brother-in-law Will Astor and the toxic leasehold scandal’, Daily Mail
Countryside Properties plc unveiled a similar deal with E&J Capital Partners last month.
E&J Capital Partners in full retreat over rapacious ground rent terms
The public quoted Ground Rent Income Fund plc, which appears to work hand in hand with Braemar Estates and shares the same offices, has also offered to vary doubling ground rent leases in its portfolio.
Those who agree to a deed of variation will see the ten-year doubling clause removed, and ground rent will instead rise at each ten-year review according to the Retail Prices Index (RPI) for the remainder of the lease term.
Other income streams – permission to sublet, park a van, move walls, built a porch or conservatory, change a carpet or perhaps keep a cat – will remain, however.
Indeed, they remain even if homeowners buy their freeholders which is why leasehold house owners term these consent fees “fleasehold” and are demanding their removal.
Adding insult to injury, leasehold home owners have to pay £80-100 even to get a response from ground rent management companies such as HomeGround, which serves the Long Harbour freeholders.
Long Harbour manages the murky Adriatic Land portfolio, where the ultimate beneficial owners hide behind nominee directors appointed by the Sanne Group, headquartered in Jersey.
To date, Taylor Wimpey has categorically refused to say how many toxic leases it sold and the scheme only applies to those leaseholders who choose to contact the company.
MPs at the All Party Parliamentary Group on leasehold reform were demanding that developers be summoned to the Communities Select Committee to give a clear indication of how many homebuyers are affected.
Sir Peter Bottomley talked of subjecting developers and ground rent speculators to the “Philip Green treatment”.
The following was received by LKP this afternoon:
I am writing to update you on the Taylor Wimpey Ground Rent Review Assistance Scheme, which we announced earlier this year.
We have been in constructive dialogue with freeholders representing the majority of properties built by Taylor Wimpey with a ten-year doubling lease and today, we are communicating the details of the first agreement to be reached, with Long Harbour and all of Homeground’s investor clients. By way of reference, Long Harbour is the investment manager and HomeGround acts as the ground rent asset manager for a number of third party companies that own the freeholds to these properties.
The agreement will enable qualifying customers to convert the ground rent terms of their lease via a Deed of Variation. If customers choose to proceed, their lease will be amended so that the ten-year doubling clause is removed, and their ground rent will instead rise at each ten-year review according to the Retail Prices Index (RPI) for the remainder of the lease term. The use of RPI-linked leases is a nationally recognised and long established measure, and is the most commonly used index for price increases across the leasehold residential sector.
As you know, the objective of the scheme has been to resolve concerns around saleability and mortgageability of properties with this type of lease, and based on discussions we have had with major lenders, we are satisfied that the terms agreed will address these concerns.
The total cost of the ground rent at the 50th year will be significantly lower than what it would have been under the original ten-year doubling lease, tackling concerns around the immediate affordability of ground rent. It is also expected that the revised lease terms will result in customers being in a much improved position from a cost perspective with regards to purchasing the freehold to their property, and removing the lease in the case of houses or extending the lease and extinguishing the ground rent in the case of apartments.
We will pay the freeholder for the Deed of Variation and also the reasonable legal costs incurred by Taylor Wimpey customers to have the lease terms converted.
As a next step, we have today written to all Homeground leasehold customers who are registered on our Scheme, outlining the terms of the agreement. If they choose to proceed, we will start the process for the lease conversion. There is of course no obligation to participate, and if customers choose not to apply, their lease will remain unchanged.
The Taylor Wimpey Scheme itself is only available to customers who purchased their home directly from the company. However, we are pleased to confirm that Homeground has agreed to offer the same terms to second time buyers. As a result, these particular leaseholders will, under the same terms and arrangement, also be able to freely apply for the same Deed of Variation to their lease, under the Landlord Voluntary Scheme.
Over the coming weeks, HomeGround will be writing to all of their Taylor Wimpey leaseholders to inform them about the agreement. This will be done in a phased manner, development by development, and is planned to be completed within 9 weeks, ensuring that all customers who have the option of this lease conversion are made aware of it.
I hope this update is helpful and we will of course keep you updated as further discussions progress.
Related posts:
Countryside Properties plc deal to buy back freeholds turns spotlight on Taylor Wimpey, BBC told
Pete Redfern tells LKP how Taylor Wimpey will sort the ground rent scandal
Questions for MPs to ask Taylor Wimpey and Long Harbour today …
Taylor Wimpey’s snake oil ground rent review scheme makes toxic leases even worse: in my case, £25m worse!
Guardian reports ‘breakthrough’ deal from Countryside … Pressure on Taylor Wimpey also to offer freeholds
APPG tells MPs: Ban ground rents. Introduce commonhold. Summons housebuilders to select committee. End rip-off ‘fleasehold’ permission fees on managed estates
Personally would not class RPI incrementing every ten years as a non onerous ground rent. Fails the new Nationwide smell test too (nothing 15 years or less they said).
And depends on the starting rate too. Have any of these GRs already hiked perchance?
Doubling ten yearly is equivalent to 7 RPI. I’d not want anything over 2.5% incremented every 25 years minimum.
Trouble with RPI, it awards the freeholder set in stone. Why? RPI is no guarantee the leaseholder will sell for the rate since purchase. Not in ‘normal’ parts of the Queen’s Realm anyway.
And of course it still leaves Taylor Wimpey customers to the tender mercy of Longharbour and Homeground for administration charges.
Far better, that the freehold is sold to the Taylor Wimpey customer at the initial price at the time of purchase(or possibly even the price the freeholds were sold at), with Taylor Wimpey paying the difference between that price and the price now demanded by Longharbour/Homeground?
In the long term, this is a far WORSE deal, though nobody will be around to see it. At least the existing scheme stopped increasing after 50 years, but this goes on increasing for the whole 999 years.
Assuming a starting ground rent of £300 and a conservative annual rate of inflation of 3% the ground rent for the final year would be the somewhat remarkable figure of £2,002,205,892,573,590.50.
I think that’s 200 TRILLION pounds, so we’d better hope that house prices keep rising as well!
The government have been indexing pensions annually for some years and whilst some think it not enough nobody has ever advanced the argument that it should be changed to 25 year reviews or be fixed or decoupled ! This government rather foolishly suggested that part of the triple lock should be removed and it nearly cost them the election
L
I would suggest that indexing is fair provided that there is a cap such that the rent can never exceed a proportion of the average wage
Therefore if you have hyper inflation and income also go up in the same proportion then if the ground rent rises by the same amount no problem
But the worry is that with increasing automation and pressure on wages from developing countries then wages may not rise in line with inflation. Therefore indexing subject to a cap relative to earnings needs to be in place
If the RPI averaged 3% per annum what would happen to incomes over the same period?
Up to now incomes have outperformed the RPI so the ground rent as a proportion of the income from which the ground rent will be paid will reduce
The state pension is locked to THREE indices one of which is the RPI so pensioners should not seeAn employer woul;d find very few employees prepared to work on a the ground rent as a proportion of the pension get any larger, in fact it should reduce overtime
An indexed linked ground rent subject to a cap where the rent cannot exceed a proportion of the average income should address this concern raised by Pro Bono
What excellent comments so far!
RPI is not normal, this whole obscene business with ground rents becoming more than a nominal peppercorn started very recently. Big developers have made these abuses of leasehold law the norm. Shame on them!
My neighbour purchased the freehold on their home with the purchase of the house for a mere £4,425. Had I been properly informed, by both Taylor Wimpey’s sales people and the TW recommended solicitor, I would have done so too. I’m now looking at at least £20k to buy via enfranchisement (and could be substantially more). Converting my lease to RPI still leaves a hugely costly enfranchisement bill. Someone tell me how this is right? This is mis-selling, had I been fully informed I would have bought my freehold. If we can have reviews and redress for PPI, endowment mortgages and pensions mis-selling, surely we need one for leasehold?
Sure, I could choose not to buy the freehold and leave myself at the mercy of unknown RPI increases, ludicrous permission fees and paying the mortgage on a depreciating home that I don’t even own, but that’s not an attractive proposition. I may go through enfranchisement only to find my freeholder won’t remove these ludicrous permission fees and will have to go to tribunal.
The people in power in this country must understand the wide scale abuse of leasehold law and the huge amount of stress (both emotional and financial) that this scandal has and is causing. It’s time to make all those who contributed to this scandal to face the music (and preferably a Commons Select Committee).
JoD, Hang in there, things might just be moving in the right direction towards abolition of leasehold – Alok Sharma (Housing Minister), said he was too new to the job to contribute and was there to learn, but he did question why houses are owned leasehold and not owned freehold. Professor James Driscoll, retired property tribunal judge, said:
“The only thing the present leasehold law is good for is for lawyers like me to make money out of it.
“The case for commonhold intellectually has always seemed to me to be absolutely overwhelming.”.
So two significant figures have made positive observations, the first relates to houses – they should be sold FREEHOLD. The second relates to apartments – they should be sold COMMON HOLD..
Rubbish! ‘Deal’. These individuals really must view leaseholders as imbeciles.
Or maybe they think the shafted leaseholders are so desperate to resolve the dreadful situation they find themselves in, that they will accept less torture to ease the extreme torture they are experiencing at the drawn leases of these developers et al. Shocking!
Dig in and fight.
Exactly, rubbish deal. And what about still having permission fees even after buying freehold? I mean, can you possibly believe that?
They are hoping people such as myself who are desperate to sell because we need to move (but have had zero interest from prospective buyers since this news broke) will jump at it hoping it will sort out my problems.
No chance Taylor Wimpey
Taylor Wimpey have had the opportunity to try and sort this mess out for people who were miss sold their homes and maybe salvage some of their reputation but so far all they’ve managed to do is show what a slimy despicable company they are.
The timing of this also absolutely stinks, it seems somewhat of a coincidence this has been offered just as the consultation is coming to an end
This does nothing to resolve how their sales process failed to make any of this clear at the point of purchase.
It also does nothing to rectify the incorrect information their sales people provided such as homeowners (ha!) being able to buy their leases at a later data for 5k. Was i mistakenly misinformed or lied too? Given the scale of the problem I don’t think this was a mistake….
The only way this can be sorted out is by the government, the developers themselves can’t be trusted at all.
Biggest mistake I’ve ever made was becoming a customer of this company.
In addition to my previous post:
I thought Phillip Raineys QC contribution was excellent.
Now he’s a chap who really knows what he is talking about.
Couldn’t disagree with anything he said.
Cath NLC) was great too!
If the RPI averaged 3% per annum what would happen to incomes over the same period?
Up to now incomes have outperformed the RPI so the ground rent as a proportion of the income from which the ground rent will be paid will reduce
The state pension is locked to THREE indices one of which is the RPI so pensioners should not see the ground rent as a proportion of the pension get any larger, in fact it should reduce overtime
An indexed linked ground rent subject to a cap where the rent cannot exceed a proportion of the average income should address this concern raised by Pro Bono
I echo Kim’s comments. Taylor Wimpey and Countryside’s offers to slightly reduce GR are an insult and PR exercise. Javid has said ‘enough is enough’. GR must be zero and why should leaseholders pay a penny to buy out the freeholder.
It’s not a good start if all Alok Sharma can do is to question the purpose of leasehold houses ! So far he is as useless but let’s hope not as dishonest as Grant Shapps.
Stephen. You have conveniently forgotten that pensions are a benefit whereas GR is a charge for no benefit whatsoever. It’s like comparing foxes and chickens. Pointless.
GR is legal robbery. I wish someone could come up with a credible defence of GR but I have never heard one.
Ground rent is deferred consideration.
Two identical houses one with a ground rent of a peppercorn the other with a ground rent of £1000 per annum will sell at two completely different figures. The discount for the one with a ground rent is effectively paid for by paying interest on that sum in the form of ground rent.
Therefore the ground is not for any service it is part of the overall consideration for taking on the lease
I believe that if this had been explained clearly when the lease was granted the issue over ground rent would not have arisen. In fact ground rents would be probably more in the range of £100 to £200 per annum
A couple downsizing in their late 50’s from a house worth £400,000 might consider accepting £150,000 for the house and granting a lease for 999 years at a ground rent of £7,500 per annum linked to the RPI. That gives them an acceptable and better return on their capital compared to an annuity. The couple buying the property do not have to take on such a large mortgage but feel secure that they have very long term ownership of the property. Such a deal would not be possible going forward.
The problem with ground rents is the failure to value the stream of income and show this as part of the consideration paid for the lease. The government should prescribe a discount rate for valuing the income so the discounted value of the rent is clearly shown next to the premium paid so that a purchaser can compare properties with differing ground rents. If this idea was on the statute book, then the ground rents that double every 10 years would not have come into existence
The idea that a rent should be protected from negative effects of inflation is perfectly reasonable demand to make. Employees expect their employer to increase incomes in times of inflation, if you are a BTL landlord you will probably try and increase the rent in times of inflation. Pensioners expect the government to increase pensions in times of inflation. Therefore, it is hardly surprising that a developer seeking to get the best overall package for the property would want the rent protected from inflation.
Any vendor of a property tries to get the best possible price. If a home seller redecorates the kitchen in the belief that by spending £2,000 it increases the value by £5,000 we would not accuse that home seller of underhand skulduggery, it’s part of the free market economy where home ownership has up to now been the aspiration of the majority of the public.
What has gone wrong is the failure to be clear on the ground rent terms and what the value of that liability is. Persuading buyers to use solicitors who will turn a blind eye to ground rent terms is of course wrong and if criminal sanctions were applied then the 6-year time limit on damages claims would be extended giving relief to those who only realize the problem on the tenth anniversary when it is then too late
Stephen, If I get you right, you are basically suggesting you can decrease the initial selling price of a property if you defer payments over a longer term by granting a lease?
That being the case would that not be construed as fraud as that would reduce the stamp duty that would have been due?
It will reduce the SDLT payable by the ourchaser because the amount of SDLT payable on the rent payments will be less
However for it to be fraud there would need to be an artificial step in the transaction and there is certainly not in this proposal.
becuase of quarantine easing the return on traditional annuities is very low and this proposal helps those such as in my example get a better return and also helps possibly younger people with their housing needs
Again provided complete transparency and proper professional advise this proposal may help both parties
Michael, You are dignifying his post. You know the truth of the matter. Namely that the feudal leasehold laws, in place since the 11th century, were at first (to an extent innocently) simply perpetuated – there was no massive deceit, and no consideration given to discounting due to the leasehold factor. Then the wide boys, spivs, and chancers, took a look at leasehold and saw the opportunity to massively exploit its existence. And that is where we are now.
As for the posters reference to “quarantine easing”, I think he should be eased into quarantine for his own benefit.
In Stephens post he states that the proposal “May” help or the proposal will “Possibly’help…
That’s not terribly definitive Is it?
I say in response – “If it’s and buts were pots and pans, there’d be no work for tinkers ‘hands.”
Ha! Very good David. Not quite ‘ Larry David’ but your ” quarantine gag is funny nevertheless- It was a gag wasn’t it? Boom boom !
Any proposal would be subject to “may” and “possibly” because the deal would depend on knowing the full circumstances of the parties .
Therefore in an example I set out which is set out in two or three lines it would have to be crouched in such terms
I actually had a conversation on twitter with a freeholder recently, he was quite proud of the fact his lease(s) werent doubling and felt it was a legitimate form of tenure. When I queried what he actually did to justify his rent demand, his response was simply “send a yearly invoice”
At least Dick Turpin had the decency to wear a mask.
The sooner this rip off for absolutely no service at all ends the better!!!
Sharma Javid & Co over to you!
That’s the whole point! As long as these charges remain legal it’s the right of the ‘investor’ to claim them, there is nothing that can be done.
We need to demand abolishion… having looked at this for years and examined the various angles I don’t see any other solution.
Accepting Stephen above will not change his views (and why should he) nevertheless the reality needs putting on record (again).
There is no evidence I see that leases are sold for less than the equivalent freehold. This cannot be proven for flats of course, but is not shown in houses.
Arguing that the recent/present problem is merely one of lack of transparency ignores that leasehold has been around for a very long time.
It ‘may’ or ‘may’ not be theoretically possible that, had people seen ‘Key Facts’ sales literature supplied by the estate agents/sellers (not weeks later when costs had been incurred) that clearly itemised the full and true present value at time of purchase of a lease’s ground rent terms along with a statutory assumption of potential RPI in future (if RPI part of the process) then maybe some buyers of a new lease ‘may’ have been in clearer position.
Ironically, the now dead Home Information Packs held no such requirement.
Consumer laws already require full transparency on key determining facts but who ever polices this? The conned buyer is stuck after the fact.
Stephen in my opinion whistles down a rather narrow tunnel, perhaps to keep his spirits up?
Given that leases are not sold at any discount as to ground rent terms (only due to the diminishing asset of the lease itself), the next point is that freeholders make their profit at sale, after which the leaseholder has to find another sucker to assign to, and the whole system pretends that something physical is for sale rather than rental.
There is NO reason for freeholders to argue they should have a protected rental stream. Anyone with a clear head and no vested interest can see this. Including successive governments.
A plan to change to 10 year RPI does not help owners if the whole market is moving away from lending on 10 year increments. Yet there it is. Minimal concession. I would want a QC or two to study every single phrase of any such lease.
And why ten years?
Leasehold is a clever scam. People can buy new leases at 99 years on the basis they will never personally face a problem. They will sell the problem on. Such leases within a mere 19 years will be a seriously diminishing asset. Nineteen years!
There is no defense for ground rents. This is obvious as there is no defense for leasehold. Developers can build and sell for huge profit if selling commonhold. Then move on and build more. There is no ethical or moral or capital return argument for spivs and speculator reversion investors to be able to buy up freeholds at 1% of value and exploit every opportunity to fleece the hapless home ‘owner’ who pays for everything.
It’s not as if you have to make this argument. Governments have been saying it for years. They have simply failed miserably to pass any workable laws based on their claimed goals. As with the awful 2002 Act that could not get even the concept of Right To Manage into useful statutes, let alone Commonhold. They were warned by Lords that their Commonhold plans were doomed with a 100% requirement and need of freeholders to volunteer.
But its not as if they didn’t have a plan. This is what the government said four years before enacting that 2002 puppy:
“Leasehold tenure is almost unique to England and Wales. It has its roots in the feudal system and gives great powers and privileges to landowners. It is totally unsuited to the society of the twentieth – yet alone the twenty-first – century.” Hilary Armstrong, DETR Nov 1998.
Totally unsuited. Totally unsuited. Let’s all sing along… totally unsuited.
The government then had a plan:
“The Government believes the leasehold system is fundamentally flawed. It is committed to introducing a new form of tenure for flats – commonhold – which in future will enable the individual flat-owners in a block to own and manage the whole building collectively from the outset. We see commonhold as the best way to tackle the problems faced by many existing residential leaseholders.”
“Fundamentally flawed”… sing along at the back…
A fundamental flaw is one that cannot be fixed. It breaks the thing. And as the saying goes, you cannot polish a turd.
Arguing in defense of a ‘fundamentally flawed system’ needs rather excellent tunnel vision, in my opinion.