Caught in a trap! Taylor Wimpey “sorry” for ripping off leaseholders!
Some mistakes are hard to fix. It is better to be careful – not sorry!
Taylor Wimpey used a trading statement last week to announce their ‘conclusions’ following a review into the company’s historic lease structures. This focused solely on a specific lease structure used from 2007 to late 2011, which provides that the ground rent doubles every 10 years until the 50th year. In doing so, the company created a new asset class that is now very attractive to specialist investors, because it equates to an annual interest rate of 7%. Taylor Wimpey claimed these leases “are considered to be entirely legal.” It remains to be seen whether the charges would be deemed by a court to be ‘fair and reasonable’ Under the Unfair Terms in Consumer Contracts Regulations 1999.
Taylor Wimpey now admit that: “the introduction of these doubling clauses was not consistent with our high standards of customer service and we are sorry for the unintended financial consequence and concern that they are causing.” Surprisingly, Taylor Wimpey says the total cash outflow of around £130million “will be spread over a number of years.” In addition, this only applies to the “qualifying customers subject to eligibility checks” – only those owners who bought from Taylor Wimpey are to be “helped.”
Ground Rent Review
Taylor Wimpey has written to buyers who have complained about their leases with the onerous ground rent doubling clause. In the letter Taylor Wimpey outline its “Ground Rent Review Assistance Scheme” funded by the company, which offers to negotiate on the customers’ behalf with freehold owners for a ‘Deed of Variation’ to “convert existing doubling leases to an alternative lease structure incorporating materially less expensive ground rent review terms.” with Taylor Wimpey covering the financial cost of doing so”.
Caught in a trap – Leasehold new houses
Given the information, no new homebuyer would ever choose to buy a house with a leasehold title. Perhaps this is why some housebuilders hide this extremely important information from new homebuyers. Even if they do think to ask about the property title, it’s no good saying “People are scared of change because it’s something new. But it’s virtually freehold.” As a Persimmon sales advisor told a reporter from The Guardian.
Is it Freehold? New homebuyers are getting caught out by newly-built leasehold houses.
Justin Madders MP for Ellesmere Port and Neston, is calling for a ban on leasehold new houses:
“It is clear this system is being abused to drive huge profits at ordinary homeowners’ expense. There is no need for there to be leasehold properties, particularly those on an estate where the properties are mainly detached houses.
“They need to be banned – it may be a convenient way for developers to get extra profit from their building work, but once they get in the hands of these private equity companies the profit motive overrides any considerations that there are real people living in their homes, who are being asked to stump up eye-watering sums.”
As Patrick Collinson reported in The Guardian on Saturday 29 October 2016, a new house built by Taylor Wimpey in Ellesmere Port was sold for £155,000 on a 999-year lease in 2009. Seven years later, the owner was quoted £32,000 to buy the freehold from E&J estates who had bought the freeholds from Taylor Wimpey. Another buyer was quoted up to £40,000 by E&J estates for the freehold of their 2011, 4-bedroom £122,000 house and despite a long lease, another new homebuyer in Manchester is was forced to pay £38,000 to buy the freehold on their recently built home.
Escalating ground rent is another issue. Taylor Wimpey set the ground rent at £295 a year on the Ellesmere Port development, with the contract stating that ground rent will double every ten years!
Buyer beware: The great leasehold new house scam
When will the incessant greed of housebuilders reach its zenith? Not content with charging premium house prices, large plc housebuilders keep coming up with new ways to squeeze every last drop of additional profit from unsuspecting new homebuyers. It started with overpriced optional extras and upgrades. Then shared driveways and non-existent front gardens enabled housebuilders to cram in even more homes on their developments. Next came the Freehold house with Leasehold type management charges – inescapable “annual rentcharges for maintenance of communal amenities on the development”, commonly around £200 a year for each home, normally for ‘maintaining’ landscaped areas.
Also becoming increasingly common, are charges for private roads, footpaths and street lighting on developments. These charges are even more galling when builders fail to fully-complete these areas for months, sometimes years after the last house was built and sold.
The website Home Owners Rights Network has been set up to fight the unfairness of these charges and campaign for a change in the law. The Leasehold Knowledge Partnership was set up to protect ordinary leaseholders.
Now some housebuilders have taken fleecing buyers to a whole new level. Selling Leasehold new houses, but at Freehold prices. There can be no other reason for this other than to increase their bottom line. As the Daily Mail reported in May 2015, two new housing estates were being built in on either side of London Road in Peterborough. At the time, Persimmon were building 50 new homes at “The Edge” on the east side, selling three bedroom homes for £158,995 – £180,000. On the other side of the road at “The Sycamores” Barratt were building 80 new homes, almost identical in appearance, with a three-bedroom property costing from £163,995.