Survey on onerous ground rent data. Please fill this in if you have a leasehold house with exploitative ground rent terms
Next week Taylor Wimpey CEO Pete Redfern is to meet Sir Peter Bottomley and Jim Fitzpatrick, joint chairs of the All Party Parliamentary Group on leasehold reform.
The meeting is private before the full APPG meeting on December 14.
Sir Peter said of the ground rent scandal: “This is the equivalent of a cancer that spreads virally through the market and it needs to be cured. Past examples need to be put right, and future ones stopped.”
Taylor Wimpey is undertaking a review into the doubling ground rent scandal and executives have been sent around the country to meet former customers who complained publicly about it.
The company describes the issue as “a complex situation”, not least because it has sold on the freeholds – for considerable sums given the income streams it embedded in these leases.
Taylor Wimpey is also scrutinising the general practice of selling houses on a leasehold basis.
The company says this is “predominantly” in the North West.
Areas such as Bolton and Ellesmere Port in The Wirral do have a preponderance of historic leasehold houses, usually with minimal ground rents. But plc housebuilders – Taylor Wimpey, Redrow, Bellway – have continued the practice, with sharply increased ground rents.
Persimmon, the biggest housebuilder, has been building leasehold houses all over the country: for example, at Aveley in Essex, and in Peterborough, Northamptonshire.
LKP has assumed that Taylor Wimpey began selling property with doubling ground rents during the downturn in order to reduce the headline price of property.
The ground rents in the freehold sale would make up for the discount.
But this is not the case.
Irvin Tarn reserved a flat for £2,000 in a new development in Mill Hill, north London, but pulled out after learning that the £300 ground rent would double five times to reach £9,600 by 2057.
Mr Tarn told the Evening Standard’s Home and Property section: “I have since spoken to several solicitors who confirmed that, like me, they had never heard of this, and described it as outrageous. The estate agents involved claimed to know nothing of it, either.”
Mr Tarn then made a point that has been repeated by LKP nine years later: “I think that first-time buyers have enough of a struggle to get on the housing ladder without national companies trying to make an extra profit by burying clauses like these in their long leases.”
Taylor Wimpey responded to Mr Tarn by stating that the rent review clause was “George Wimpey UK policy and is in place on all leasehold developments.”
It offered to refund his reservation deposit “as a gesture of goodwill”.
David Bridges of Taylor Wimpey said: “Historically, most ground rent review clauses were tied to the Retail Price Index (RPI). But house price inflation has significantly outstripped RPI, and developers are looking at terms and conditions that better reflect this.”
In other words, leasehold gives developers an opportunity to create an investment asset class by embedding a sizeable income stream in the freehold that can be sold off.
Somehow or other, this is deemed acceptable in England and Wales, but it involves the erosion of wealth of a new generation of homebuyers.
Related posts:
Taylor Wimpey CEO says doubling ground rent scandal under ‘review’. But Bottomley asks: ‘Have innocent homebuyers been shafted?’
Bottomley tells Taylor Wimpey to explain ‘sharp practice’ ground rents – and asks for names of directors who approved them
Taylor Wimpey rejects responsibility to resale buyers facing doubling ground rents
BBC R4 You and Yours exposes Taylor Wimpey buyers facing doubled ground rents to £500 before 10 years have passed
Taylor Wimpey ‘stretches credulity’ by refusing to list properties sold with doubling ground rents
Labour to cap ‘legalised extortion’ of ground rents and end leasehold houses … Opposition and government now compete to reform leasehold
It is good to see things are starting to move in the right direction.to resolve this issue.
Let’s hope those 24 customers will get some good news before Christmas.
And something can be done to help all purchasers of leasehold houses, a practise that needs to stop.
I notice that the Chief Executive of Taylor Wimpey is a Trustee of CRISIS, the charity for homelessness. This at least shows some compassion, let’s hope it can be put into practice now on this issue.
MH, where are you getting the figure of 24 “. Can you explain fully to us all where you get 24 from.
The number of “customers” affected is the number that have a lease that increases by ANY amount during its whole term.
Are you condoning those leases that increase by rpi as being “alright then”. If you are things are going backwards.
If you look at a typical lease on an apartment block that was built 25 years ago in Warwickshire it does not increase whatsoever within its term.
Clearly to be a Trustee of CRISIS does not mean you have to have any compassion
Trevor, the 24 are those who have come forward to say they have been severely disadvantaged due to these particular outrageous ground rents, preventing them selling their properties or prospective purchasers to obtain mortgages.
This is the immediate problem that has been exposed and the one which Taylor Wimpey, are I hope, going to resolve now.
Obviously there will be many thousands of other leaseholders of recently built houses by several contractors who will have suffered to the same or lesser extent. And some who are quite happy. I have a leasehold retirement property with a fair ground rent and have no complaint.
The only solution I can think of (probably impossible), is for the the developers of all these leasehold estates to help the leaseholders to buy the freehold of their properties. And for the Government to legislate against building any more.
At least as a result of LKP and its supporters campaigning Taylor Wimpey management is discussing the problem with concerned MPs and the 24.
Had they been sacked or put into prison as some suggest, this would not have happened…
So MH, we have all this press publicity, hundreds of posts, hours and hours of dedication by the likes of LKP and Sir Peter and TW are only going to possibly help 24 people
Well that’s a disgrace. So they are only going to help the 24 that have complained and not the hundreds that will severely suffer.
If they actually do help the 24 it is only touching the tip of the iceberg.
They may as well have just been sacked etc if they are only going to help 24.
Needs the Guardian and others to do front page publication telling all these leaseholder to step forward and complain
Well, as a start TW are actually dealing those who have actually complained. Let’s hope they get a fair settlement.
I do not know how many Leaseholders are on the TW escalating ground rent system, but obviously as news gets around they will all be looking for equal treatment and should receive it.
So lets see if this TW/MPs meeting brings any success..
As regards all the other ground rents which increase by RPI there is not an easy solution. Except to assist the Leaseholders to purchase the freehold and put a stop to any future leasehold housing developments
“I do not know how many Leaseholders are on the TW escalating ground rent system”
Well you can add me to make 25 🙂
I completed in June 2016 as a first time buyer with this term for a property on the south coast – well I don’t know if it doubles or is linked to RPI because on close inspection the lease it could be either. There was no clarity. I have already filled out the LKP survey.
“No name”,
Welcome to the Club. Are there any more out there.?
I sincerely hope that this Campaign will result in you all getting a fair resolution.
With your knowledge and no doubt access to certain areas MH I am sure it is not impossible to find out the number on the escalating ground rent.
You say – As regards all the other ground rents which increase by RPI there is not an easy solution.
Well if that is the case TW and all their cronnies have won as far as I am concerned.
The bottom line is, it looks like they may help just 24 out of hundreds.
We really do need a major input from the press
You have to love the
guff that crops up again and again and in leasehold dealings. Professionals get caught ripping people off, taking shameless advantage of the vulnerable, and they resort to this feeble formulation.
Ripped off some vulnerable pensioners in retirement homes by raiding their reserve funds for unneccesary expenditure and kickbacks? No problem, just turn yourself in and make a token payment as a….
gesture of goodwill
Had a pensioner die in a fire? Time for a heartfelt apology and (can you guess?) a…
gesture of goodwill
Taken advantage by burying ground rent increases in the lease? Been caught? Embarrassed? Ashamed? No worries. Time for the old
gesture of goodwill
What it means is We admit nothing but we’d like the bad publicity to go away and, in many cases, here’s a token by way of apology; we think it’s fair, and it’s all you’re going to get unless you sue us, (you’ll lose, what we did was perfectly legal). And by the way lots of other people were getting away with the same thing so it was accepted practice and your solicitor should have known that.
Time for the All Party Parliamentary Group to get together and draft legislation to abolish leasehold tenure? As a gesture of goodwill? Or might that be taking gestures too far?
“If you look at a typical lease on apartment block that was built 25 years ago in Warwickshire it does not increase whatsoever within its term.”: Trevor above..
The individual right to a statutory lease extension applies to all qualifying leaseholders of flats. The extended lease will be for a term expiring 90 years after the end of the current lease and will reserve a peppercorn rent throughout the term.
In other words, the lease will be broadly on the same terms as the current lease..
As this is the statutory right of the individual leaseholder, I am at a loss to understand how any landlord can impose an “informal” lease extension based on RPI plus.
Answers on a single A4 please!
I think that Trevor was being critical of of the scandalous ground rents on recently built leasehold properties which increase by 100% every 10 years.
He was comparing them to older properties in Warwickshire where there is a fixed ground rent which never increases. Not satisfactory but much fairer.
Thank you MH. Yes that is what I was referring to.
The Ground Rents scandal is not confined to “… recently built leasehold properties which increase by 100% every ten years.”, it extends to the “…typical lease on an apartment block that was built 25 years ago in Warwickshire” and, which, “…does not increase whatsoever within its term”.
The typical lease built 25 years ago in Warwickshire was for 99 years and is now down to 74 years remaining on the existing lease. This lease requires an extension.,and the leaseholder has an individual statutory right to an extension for 90 years beyond the current lease with a peppercorn throughout the term..
Back to my question, how can any landlord impose an “informal” lease extension subject to RPI etc ?
I understand that the Statutory proceedure for lease extension does not allow for increases in ground rent charges, in fact it removes them.
Also it does not allow for changes in lease conditions. At a cost of course.
Therefore it is best to get professional advice before undertaking this action.
Alec I can see where you are coming from and basically agree.
However the point I am making is that these “old”, and acceptable, leases I am referring to make no reference whatsoever within them that the ground rent is to increase within their term, therefore it cannot..
However these leases that TW, Pers, Redr etc have issued actually stat in them, and refer to, actual increases to the ground rent, numerous times, that will take place within the term of that lease.
Michael/Trevor: I appreciate this, however, there is the wider scandal of “informal lease extensions”, linked to the illegal and criminal sale and purchase of freehold titles.
As Michael states: “…the Statutory procedure for lease extension does not allow for increases in ground rent charges. In fact it removes them.” and, “…does not allow for changes in lease conditions”.
Hence my question: How can an unscrupulous freeholder impose in such leases “new” ground rent conditions linked to RPI plus,. under terms of an “in formal lease extension”.
At the very least I would expect the First Tier Tribunal-Property to throw such illegality out without so much as a hearing!
Whereas the “informal lease extension racket” thrives. Why? How?
Alec
A leaseholder does not have a legal right for an informal lease extension and when they enter into discussions with their freeholder directly, they step outside the (scant) protection they have under the statutory route.
Therefore the FtT has no jurisdiction at all in informal lease extensions, you can’t even apply to the tribunal to make a judgement or look at your case. You are on your own and whatever terms you sign up to, you and the flat are stuck with for the remainder of the term of the lease.
The details of an informal lease extension passed over my desk yesterday. Ground rent £300 a year, doubling every 5 years AND linked to RPI! That flat is now worthless. I guess over 20,000 of these informal deals are done every year.
It’s important to remember that the ground rent becoming a huge amount in its own right is one problem, the cost of extending the lease again with these new ground rent amounts can be many 10s of thousands of pounds due to the high GR within 15 years. A double whammy for the unscrupulous freeholder and financial ruin for the leaseholder.
What a terrible situation this is. I wonder how many unsellable properties there are in the country.
What eventually happens to them and what is the solution?
Even if we do get new regulations, can the existing problem be solved by compulsory purchase.
Unseeable properties are an asset. To the freeholder, of course. It makes me rather angry when I hear people say about “gesture of goodwill”. ! Legislation is what we need not charity!
There are a lot Michael. What happens to the flats? Either the owners struggle on until they can no longer afford to keep up the payments. Luckily for freeholders the law states that if you owe more than £350 in a ground rent debt, or any amount at all that is owed for more than 3 years, then the freeholder can go for forfeiture of the property.
Usually though many flat owners simply hand the keys back to the freeholder and walk away. The freeholders gets to sell the flat and keep the money.
Mostly the flat owners just get into much more debt to pay off the freeholder. We are helping someone who at a vulnerable time in her life was bullied into terrible informal LE for 14k with very bad GR clauses. She then decided to buy the freehold of her building with her two neighbours to rid herself of her ‘criminal’ freeholder.
If her initial LE had been statutory one it would have cost her around £150 to buy her share of the freehold but now she will have to pay £38,000 because of the onerous and complex GR she had unwittingly agreed to! This just two years after she paid to extend her lease. Her informal LE cost her an additional £38,000 in two years.
How is this not a crime?
Louie, thanks for as ever fine input, which again highlights how widespread the scandal surrounding Ground Rents actually is.
Long leaseholders do have a statutory right to a 90 year extension on existing lease terms, and anyone “luring” gullible, vulnerable,and unsuspecting leaseholders into an “informal” arrangement is in breach of that statute and knowingly engaged in criminality. especially where the freehold titles to the premises concerned have been obtained through criminal breach of the LTA 1987 as amended by the Housing Act 1996..
This is now a major national scandal involving 10’s of 1000’s of properties built during the 70/80/90s throughout England, and one that is netting millions for the unscrupulous, which explains the “wild west” scramble for such titles by latter-day Rachmanist carpetbaggers.
The issue of Ground Rent abuse in all its forms must be taken up by LKP/Campaign against retirement leasehold exploitation at the forthcoming All-Party meeting on Wednesday, 14th, and the Law Commission must put this topic at the head of its “to do” list.
Sorry to be a pain and as usual ruin the “party “. Can you explain to me how Louie has shown this to be a wide spread problem. I maintain and continue to maintain that this issue is minor and exists in very few lease extension cases and this is not wide spread and certainly not in need to be on top of leasehold agenda issues. But why ruin a good story ? The facts are not relevant when it comes to knocking the leasehold system. There are faults but the ground rent issue highlighted is not a big issue ,and this issue can be sorted via the lawyers who acted for leaseholders who should pay compensation. In addition if lawyers are now made aware of this issue then this so called loophole will not work for any future transaction as lawyers are aware. There is no need to legislate and there are more pressing issues.
‘Interested’ what planet are you on?? Of course this is an issue. What is your agenda? Are you a managing Agent whose employer is buying up ground rents? Of course there is a need to legislate. There is also a need to legislate on dishonest Managing Agent Scum.
Interested, The only ‘Party’ relevant here ,is the the “Party” that will soon be over for uncpscrupulous Rachmanist spivs buying up ground rents and their abetting Agents, Solicitors. And surveyors. High time too- disgraceful behaviour.!! The offending individuals all need to stand in a corner and have the backs of their legs smacked very very hard indeed. I will be happy to crack the whip! Yeeehah.????
Interested , Your contribution to this issue is as facile as your contribution regarding ‘ Forfeiture ‘ in a previous post you made several months ago. Here’s something you might understand- ‘ If it walks like a duck, quacks like a duck , it is a ???? Duck . Comprende?
I live in a Retirement Flat.
When I inquired about extending my lease I was only given a price for what I believe is called an informal lease extension by the agent acting on behalf of the landlord.
This would have brought my lease back to its number of years when it was first purchased.
I decided to employ a solicitor, who gave me the choice of an Informal Lease or an Extension of 99 years and a Peppercorn Ground Rent. The Solicitor explained this was the correct way: Extension with Peppercorn Ground Rent.
It has taken 12 months to nearly complete, I am at present waiting for the Landlord.
I was aware when I started that I was responsible for my Legal Fees and the Landlords Legal Fees.
What I was not prepared for was that there was a number offers given to my Solicitor and my Solicitor advised me to reject them as they were not what had been asked for. My Solicitor had informed the Agent acting on behalf of the Landlord what was expected in her first correspondence.
It was like being in a Country where they haggle, this was carried out at my cost.
How can this be right in a civilized Country in the 21st Century?
Derek,
If you wish to extend a lease that is administered by Estates & Management, they will force you to pay a fee of 150 pounds simply to inquire about a lease extension.
For this 150 pounds a sales team will contact you to suggest a “variety of extension options”
I agree that “Interested ” is totally out of touch with reality. My flat in the north east had a 99 year lease, which had dropped to below 80 years. I extended it the formal way at the cost of £10,000.
I was able to do this as I have a decent amount of savings, though I would rather have spent the money on a nice holiday, car or home improvements. My neighbour who wanted to sell his flat was given the option of extending informally for no initial outlay other than legal fees. The solicitor said she didn’t think the new ground rent of £400 increasing every 10 years by rpi. would prevent people buying as it was just another bill. Well, the flat was sold for £50,000 to a cash buyer who is letting the property. However, the investor ( a neighbour ) didn’t even know what I was talking about when I asked if the huge ground rent was a problem. When I rang the estate agent pretending to be a prospective buyer the agent said that there was a service charge of £400, we don’t pay service charges Many properties are advertised as ” we have no knowledge of the tenure ” or ridiculous statements such as lease extended to 99 years or for 99 years ! When from? Take your pick . A large number of flats built here in the 60s and 70s are now unable to be sold due to short leases. On an estate in Cramlington there are currently around 40 flats on the market.People just can’t afford to extend formally so choose to extend informally or do nothing. This problem affects both old and new properties. Time it was stopped.