Tag Archives: pete redfern

Taylor Wimpey Announces £130m Leasehold Sticking Plaster Solution To Housebuilders’ PPI

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 Loddon Park Freehold but far from problem freeTaylor 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 ground rent review letterTaylor 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”.

The letter to buyers concludes: “we believe this is the best answer for you.”

But a look under the bonnet and we find this interesting insight contained in the Seeking Alpha transcript from a Taylor Wimpey Earnings Conference Call on 27 April 2017. In it Taylor Wimpey CEO Peter Redfern concedes:

“this [leases] is clearly an uncomfortable issue” [as they try to]  “work out what’s the best way to reduce the reputation issue for the group – a historic leasehold issue that we think is right to deal with but important to do and get right in one hit, which is what we believe this is”

“In terms of timing, we don’t expect this to result in a significant near sort of immediate cash payment from the group. We think it will be spread over a number of years.

But I think most importantly, we’re confident that this does not impact our ability to follow through on our dividend plans to potentially increase our dividends in 2018″ 

Some more questions raised by the Taylor Wimpey announcement of £130m to rectify the ground rent and leasehold house scandal

When asked specifically about the issue of leasehold new houses Redfern said:

“You’ll be aware there’s lots of noise around leases more generally. But our own use of leases on houses, for instance, is lower than many in the sector. And also, what stands out about this is the scale and the fairness. What’s interesting in terms of whether it becomes a wider issue which we think is unlikely, is that we haven’t had a single legal claim, including on these doubling ground rent provisions. Because people did have independent legal advice, the contract is very clear, this isn’t a case.”

 The sale of leases on houses historically, people knew they were buying a leasehold house” “And the other elements actually, sort of — people knew they were buying a leasehold house.”

Did they really Mr Redfern?  Many were forced, coerced, or otherwise financially incentivised to use housebuilders’ recommended solicitors, never a good idea and can hardly be described as “independent legal advice.” In fact a class action for negligence is being prepared against new homebuyers’ solicitors.

Many were told by sales staff, they could buy their freeholds for a few thousand in 2 years time, only to find the private firms that bought the freehold were asking £30,000 or more. Many were told, incorrectly, that leasehold house was virtually freehold. Ellie Taylor posted on the National Leasehold Campaign Facebook Group: “We were told ‘it doesn’t matter because it’s a 999 year lease and you will be long gone by then’ – I found out it was leasehold just before we signed to reserve, I went outside to call my Mum as I was concerned and they [sales staff] made out like I was being daft.”

On doubling ground rents, Redfern said:

“I still think if we’d have done a really good diligent job, we should have seen the issues at that point in time. But we didn’t. But we’re looking back now with the benefit of hindsight in a different world”

Asked if this was being done to “preempt government taking this on board and championing the home owners cause”:

“we think this specific lease class, with hindsight, isn’t quite fair. I don’t actually think it’s that likely that government will take retrospective action on that. And clearly, if we thought that was imminent or likely to happen, we wouldn’t be making this announcement today. We’d wait and see what that is. But how we read that situation is, that is unlikely.”

Ground Rent Review Taylor Wimpey It is clear to me from the transcript of this broker teleconference, that Peter Redfern has no intention of ever helping those that bought leasehold new houses to obtain their freehold, either at reasonable rates, or at no cost as part of a compensation measure. Indeed, it is clear Taylor Wimpey do not even believe they have done anything wrong selling new houses on a leasehold basis. It is to be hoped that those in government are not taken in by this token gesture (‘Ground Rent Review Assistance Scheme’) which only relates to ground rent doubling every 10 years and nothing else. Even that, Redfern predicts, will take a “number of years” to complete.

It is my opinion that Taylor Wimpey have broken ranks, in an attempt to claim a non-existent moral high ground over other miscreant house builders. Peter Redfern, no doubt in consultation with other housebuilder CEOs, who unlike Taylor Wimpey, have no plans to stop selling their new houses on a leasehold basis, made this move to give the impression the industry was contrite and doing something positive. Indeed the Leasehold Knowledge Partnership  said on their website that Sir Peter Bottomley and Jim Fitzpatrick MPs and co-Chairs of the APPG for Leasehold and Commonhold Reform, “were contacted by Taylor Wimpey last night [26 April]. They were invited to discuss the issue with CEO Peter Redfern at 10am” [27 April] following the announcement and ahead of the firm’s AGM an hour later.

This statement has the potential to pull the wool over the eyes of those in parliament who quite rightly, want the sale of new houses on leasehold banned and those leaseholders for whom it is too late, given an opportunity to buy their freeholds either at reasonable prices, or be given their freeholds by their housebuilders. Obviously the housebuilding industry does not want this. It will be very expensive, albeit still affordable, given the excessive profits being made and obscene levels of LTIP bonuses being handed to CEOs – most of which has only been achievable because of the Help to Buy Scheme.

The Taylor Wimpey statement has enabled the industry an opportunity shed some positive, pre-emptive light, on what has been and continues to be, nothing short of a national scandal, described in parliament as the “PPI of the housebuilding industry” that has been allowed (and currently perfectly legal – but not morally right) for many years. An industry-wide hoodwinking of new homebuyers, many buying with the taxpayer-funded help to buy scheme, now own virtually worthless leasehold houses.

The report of the All Party Parliamentary Group on leasehold reform, coincidentally published on the same day as Taylor Wimpey’s announcement stated:

“The current government has accepted the sale of new build leasehold houses is a key area in need of urgent reform. The Prime Minister, the Secretary of State and the Housing Minster have each argued strongly that there is no legitimate reason for the sale of leasehold houses unless for the exceptional circumstance where the developer cannot own the freehold.  The APPG supports the proposal to ban the sale of new build leasehold houses…”

There is not a single reason why legislation cannot be brought very soon after the election, to ban the sale of leasehold new houses.  Perhaps each party should make this pledge  in their manifestos.

It was mooted by Sajid Javid  that Help to Buy could be withdrawn for builders not selling on “fair terms” in his speech on 28 March 2017:  “Helping builders to get building“:
So I will look to ensure Help to Buy Equity Loans are only used to support new build houses on acceptable terms. This will send a serious message to the building industry: if you want the government to help you build and sell homes, you have to sell them on fair terms.”

It is time and it is right that Help to Buy is withdrawn.

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Commons Debate Leasehold New Houses Scandal

“The PPI of the house building Industry”

The APPG for Leasehold and Commonhold Reform managed to secure a debate in the commons chamber on Tuesday 20th December 2016 to discuss the leasehold new houses scandal. With 53 APPG members, it was surprising that only 13 MPs and Housing Minister Gavin Barwell attended initially. I previously highlighted the scandal of leasehold new houses on 7 November 2016 entitled “The next mis-selling scandal” This phrase apparently being picked up, with the Labour MP for Ellesmere Port and Neston, Justin Madders calling the practice during the debate as “the PPI of the house building Industry”. See also Never buy a leasehold new house 28 October 2016

leasehold new houses scandal

Leasehold new houses scandal

LeaseholdAn analysis by the excellent campaign group  Leasehold Knowledge Partnership (LKP) in November 2016, revealed that 8,775 new-build leasehold houses totalling nearly £2billion were sold in England and Wales last year. In all around 45,000 new houses have been registered as leasehold. Many of these bought with help from taxpayers’ through the Help to Buy scheme. In most cases, the housebuilder sells the freehold after a couple of years to a private company, which can then demand extortionate fees from homebuyers.

The LKP say that housebuilders are collectively making an extra £300-£500 million a year from selling new homes as leasehold and then selling freeholds to third parties. The only conceivable reason is to produce an income stream, whilst not illegal, it’s not morally right. The Sunday Times recently reported that over the last two years, Berkeley Group has made a £136million profit selling ground rents that generate £153million a year. In their 2015 annual report Berkeley stated During the year, the Group sold a portfolio of ground rent assets at a gross profit of £85.1 million.” In their 2016 annual accounts, Barratt Developments declared an income of £51.6 million (£34.7 million in 2015) under “other income … which principally comprises the sale of freehold reversions, ground rents, property management income and management fees receivable from joint ventures”.

On 13 September 2015 the LKP said:

“politicians supposedly concerned with issues of leasehold should be questioning this matter. Indeed Persimmon should be under further scrutiny for holding its freeholds in offshore companies – the easier to flog off to anonymous entities and avoid the leaseholders’ right of first refusal. Jeffrey Fairburn, CEO of Persimmon, says he wants to engage with ‘stakeholders’, but is less enthusiastic to explain why he is building leasehold houses around the country”

Following pressure from MPs and the LKP Taylor Wimpey has undertaken to cease building and selling leasehold new houses from 1 January 2017. The government said it will scrutinise the enthusiastic monetisation of leasehold by other housebuilders in the New Year, including Bellway, Redrow and Persimmon, whose leasehold houses are built and offered for sale nationally.

Some housebuilders have been selling leasehold houses since 2007. Housing minister Gavin Barwell confirmed that 43% of all new build registrations in England and Wales in 2016 were leasehold.”

According to a survey by LKP of 105 leaseholders with onerous ground rents: 58% bought their properties using the solicitors recommended by the housebuilder. 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.”

MP’s debate the leasehold new houses scandal

For the full Hansard transcript of the debate click

Sir Peter Bottomley comprehensively exposed the abuses and he named names. He said this “goes beyond sleaze”. A CBRE report stated that some people who are developing property with leaseholds are now selling the freehold in advance so that they escape the responsibility of offering it to the leaseholders after two years. He said: “I own some shares in Persimmon and some in Taylor Wimpey, and I might buy some shares in other builders. If necessary, I shall go to their AGMs, giving notice in advance, to ask what they will do to unwind the problems that they created in the past.”

The leasehold new houses scandal
Justin Madders
Labour MP for Ellesmere Port and Neston

“This is nothing short of a national scandal. It is the  PPI of the house building industry.

Thousands of people around the country who bought new homes in good faith are the victims of what can only be described as a racket by some of the country’s best-known developers, who between them have received millions of pounds from taxpayers to provide affordable homes and have also been the recipients of generous subsidies as a result of policies such as the Help to Buy scheme.

When people buy their home, they like to know who they are buying it from, but leaseholds are often sold on to third parties who can then vary the agreed terms of the leasehold, at which point—this is a scandal—developers claim that it is no longer anything to do with them

The prices quoted [for buying the freehold] can vary significantly for almost identical properties, suggests that the buy-out costs are calculated on nothing more than what the investors think they can get away with.

One constituent received advice from solicitors who were recommended to her by Taylor Wimpey, and she felt under some pressure to appoint them. She was advised that the lease did not impose an unduly onerous or prejudicial burden. This was for a leasehold Taylor Wimpey house with a ground rent that doubled every ten years.

It is a cynical business decision, which will in the long run damage the reputation of those involved.

It is also disappointing that the newest development in my constituency, currently being constructed by Redrow Homes, is also being sold on a leasehold basis. Redrow tells me that this fact is made known to purchasers before they reserve their property, although I note that on its website the promotion of that particular development makes no mention of that. What is particularly disappointing is that Redrow, despite my asking twice why it feels the need to sell large detached family homes on a leasehold basis, offers no justification whatsoever.”

“Does he [Housing Minister Gavin Barwell] agree that developers should be prohibited from recommending a particular solicitor to purchasers because of the clear potential for a conflict of interest and the clear failure, as we have seen here, to provide the best advice?”

“Will the Minister consider withdrawing and recouping taxpayer subsidies to any development found to be ripping off householders in this way?”

I am sure Oliver Colville will recall my presentation to the APPG Inquiry Into the Quality of New Homes, when I called for an “end state funding and government help for failing and indifferent housebuilders.” I am not sure how this funding can be retrospectively “recouped” from particular housebuilders, but Help to Buy and other schemes are no longer necessary as low-rate mortgages are now freely available. I also suggested that No housebuilder should be allowed to encourage their buyer to use any particular firm of solicitors or mortgage broker.” Now MPs can see the damage that housebuilder suggested/recommended solicitors does and how this clear conflict of interest adversely affects and disadvantages new homebuyers.

Oliver Colville said that housebuilders are selling the freeholds in advance so they do not have to be offered to new home leaseholders.

Housing Minister Gavin Barwell said that he acknowledges that many of the examples raised by MPs in the debate are not exceptions and that there are widespread problems that need addressing. He said:

“Analysis by LKP suggests that nearly 9,000 houses were built and sold last year as leasehold. Some have no shared services or estate management functions. In fact, they seem to exist only to create a reliable income stream from the ground rent, permissions to alter the property, and selling on the freehold at some point in the future. Developers can maximise their return by selling the freehold interest to the leaseholder at a higher value after they have moved in, or by selling it to a third party without informing the leaseholder. That is a critical point: if a freeholder wishes to sell a leasehold flat, the leaseholder has the right of first refusal, but that right does not extend to those in leasehold houses. The Secretary of State [Sajid Javid] and I have been looking closely at the issues raised in recent weeks and we are both absolutely determined to stamp out unfair, unjust and unacceptable abuse of the leasehold system.

We should not be under any illusions. The problem does not just concern one company; a number of our larger developers are involved in it. They would do well to remember that they are building homes for people to live in, not investment vehicles for financial institutions. Except in a very few exceptional circumstances, I cannot think of any good reason for houses to be built on a leasehold basis. If the industry does not put a stop to the practice and help existing homeowners, we will look to see what Government can do.

Both this House and the Government want to hear more from the developers about what they are going to do to put the situation right.

The motion states that the House “has considered” this issue, and I want to reassure my honourable Friend that it will be considered by the Government and that we will come back in the New Year with proposals about how to tackle it.”

Quite frankly, the housing minister should be telling the housebuilders what they must do, not asking them for their proposals to end this leasehold new houses scandal. After all, it is the lack of any law prohibiting this that has enabled the housebuilders to get away with this practice for nearly ten years, yet only now is government recognising the problem.

On 5th October 2016 Prime Minister Theresa May told the Conservative Party Conference that she was about:

“Righting Wrongs : Challenging vested interests : Taking big decisions : Doing what we believe to be right : Getting the job done : That’s the good that Government can do and that’s what I’m in this for : Standing up for the weak, standing up to the strong.”

“Standing up” to housebuilders and “righting wrongs”. Banning the sale of leasehold new houses and ending Help to Buy on 1st January 2017,  making it illegal for housebuilders to nominate, suggest, recommend or offer homebuyers cash inducements to use a preferred firm of solicitors and setting up a New Homes Ombudsman would be a good place to start Mrs May!

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The Redfern Review – How Is CEO Peter Redfern Doing At Taylor Wimpey?

peter-redfernIt has been over seven months since Taylor Wimpey released its results for the full year to 31 December 2015 (1 March 2016). This included a statement from Chief Executive Peter Redfern, which recognised improvement was needed with regard to his company’s poor customer satisfaction levels. Perhaps it is time to take stock and conduct our own ‘Redfern Review’.

Peter Redfern said:

“During 2015, we achieved a customer satisfaction score of 86% (2014: 87%). We are disappointed that this has slipped. Whilst we operate in a cyclical market, we strongly believe that a customer centric approach is needed throughout the cycle. During 2015 we completed an in-depth review of every aspect and stage of our Customer Journey, to identify areas of improvement and to deliver a better homebuying experience for our customers. Throughout the review, our focus has been on understanding our customers’ priorities to enable us to deliver at and ahead of expectations. We have also commenced the process of rolling out our new customer approach across the business with a focus on three main areas: our culture, management structure and process. This is to ensure that going forward we deliver the right product, supported by excellent customer service to all our customers at every stage of their journey with Taylor Wimpey.

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Defective Taylor Wimpey new home causes injury to 10-year-old girl

Enough is enough! What will it take before government finally acts, not only to end the misery faced by the majority of people that buy new homes, but also to drastically reduce the likelihood of another death caused by a defect in a new home? Last week a defect in a Taylor Wimpey new home injures a 10 year old girl.

Oliver Colvile MP

Time for action? APPG Chair Oliver Colvile MP

Since the APPG Inquiry published its Report  ‘Into the Quality of New Homes’  three weeks ago, there has been zero coverage of its recommendations in national media. On a personal level, I have written to every single one of the 650 MPs asking for their support and to lobby the DCLG for the introduction of a New Homes Ombudsman. Just one MP has replied so far. Is anyone prepared to do anything before someone else is killed in a defective new home?

On 15th October 2005, a four-year-old boy died from chest injuries after a 50kg (110lb) stone mantelpiece over a fireplace fell on top of him at his Persimmon-built family home in Coulthard Close, Towcester.

In February 2008, Elouise Littlewood was 26 when she died in the flat she owned with Notting Hill Housing Trust built by Barratt Homes at their Bedfont Lakes complex in Hounslow. A post-mortem carried out on the body found the concentration of carbon monoxide in her blood was 77 per cent. Her lodger, Simon Kilby, was left with permanent brain damage after he was discovered unconscious on the sofa.

Only this morning I learned that on 28 July 2016, a radiator had detached from a wall and had fallen on 10 year-old Gemma Fever in the kitchen of the family’s Taylor Wimpey new home at their Rackenford Meadows development in Tiverton, Devon.

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Quality compromised in rush to build new homes

At last! Peter Redfern admits quality is being compromised in the rush to build new homes

Pete RedfernTaylor Wimpey CEO Peter Redfern has said that the Government’s target to build a million homes by 2020 is unachievable and quality will be compromised if the industry does try to meet it. Well if anyone should know about compromising the quality of new homes it’s Redfern! Taylor Wimpey has a terrible reputation for building poor quality homes and when their customers complain, an equally poor record and attitude to fixing these defects. This, despite the claims made on Taylor Wimpey’s website including: “The standard of home building in the UK has never been higher than it is today.”   ” it’s like buying a brand new car and driving it out of the showroom” Only with a new car it is unlikely to have as many problems as a new Taylor Wimpey home!

Only last November, Taylor Wimpey were extensively featured on the Dispatches Documentary “Britain’s Nightmare New Homes.” In 2012 Taylor Wimpey were again panned on the BBC Watchdog programme.

The company’s unhappy buyers regularly lambast the builder on social media with the twitter feed #thinkwimpeythinktwice. On 5th December 2015,  BBC South today recently featured the story of Evelyn Lallo who has been living in temporary home since June 2015, whilst Taylor Wimpey sorts out serious defects.

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Corbyn appoints Taylor Wimpey CEO Redfern to advise on housing

Pete Redfern Taylor Wimpey CEO is Corbyn’s appointed housing tsar.

CorbynIt would appear new labour leader Jeremy Corbyn has appointed Pete Redfern, chief executive of Taylor Wimpey, to lead a review of housing to help form Labour policy on the issue. Quite what housing expertise Corbyn thinks Redfern, with his background in accountancy, can bring to the table is a mystery to me. If is often said that accountants know the price of everything and the value of nothing. Redfern trained as an accountant with KPMG. He then became financial director of Rugby Cement before he joined George Wimpey in 2001. He  became CEO of Taylor Wimpey in July 2007 following the merger with Taylor Woodrow.

He chose PoorlyIt has emerged that Corbyn’s newly appointed housing adviser is the CEO of a British company that has been associated with tax avoidance. Mr Corbyn, you have chosen….. poorly!

Documents show housebuilders Taylor Wimpey had a Luxembourg division which it used to cut its UK tax bill – exactly the kind of scheme that Corbyn and Shadow Chancellor John McDonnell have pledged to bring to an end.

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Taylor Wimpey CEO Peter Redfern suggests there is scope to increase prices of new homes even in a falling market!

The Daily Telegraph recently published a story featuring Taylor Wimpey CEO Peter Redfern claiming that new regulations following the Mortgage Market Review, which have restricted borrowing for second-hand homes, have not adversely impacted the business and Help to Buy is still being used by their first time buyers. The company also announced that it is fully sold for 2014 and has confirmed a profit upgrade.

Pete Redfern

Peter Redfern

Mr Redfern, in a somewhat blatant attempt to talk up the prospect of further  new home price increases, is claiming that housebuilders have more room to adjust prices upward since they were starting from a lower base, having fallen behind valuations for existing homes after the great recession. So are we to interpret that, housebuilders such as Taylor Wimpey have not increased their prices in line with the general local market since 2008?

He said:

“Housebuilders have to keep liquidity in the business and have more room for price adjustment sellers of existing homes by contrast may take their property off the market if they are not getting the right offer. Big houses in the country market are also proving harder to sell, where housebuilders are not that prevalent. This is having a negative impact on the outlook for the market for existing homes.”

Schemes, in particular Help to Buy, continue to give the new home industry a taxpayer-subsidised helping hand.   “………..attractive products that help credit availability and affordability – whereas stricter mortgage rules have started to affect sales in the second-hand market. After the downturn mortgage lenders penalised new build specifically apartments as they felt young buyers posed a greater risk with good incomes but low deposits, but these differences are starting to unwind.”

If new homes were penalised, it was because there is always  a 10-20% price premium. Lenders required higher deposits to give more of a buffer to account for the premium and added risk of steeper falls in valauations should the market turn.

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House builders react as Ed Miliband re ignites his land grab mandate

Ed MilibandIn a speech to the party’s national policy forum, Mr Miliband is set to confirm that increasing the number of new homes built each year will be a key priority for an incoming Labour government. He will confirm measures to force house builders to stop hoarding land with his “use it or lose it” proposal. 

Other options also being considered include giving councils the power to fine companies that own large areas of undeveloped land or to require them to pay council tax or a special “land tax” on the undeveloped land in question. As a last resort house builders who refuse to build could find themselves facing a compulsory purchase order.

Mr Miliband will say: “We have to be willing to confront some of the obstacles to house-building. Across our country there are firms sitting on land waiting for it to accumulate in value and not building on it – landowners with planning permission who simply do not build. We have to change that… permission to build should mean landowners build.” 

Mr Miliband recognises that the profits of the biggest four developers by volume – Barratt, Berkeley, Persimmon and Taylor Wimpey – have risen by 557% since the coalition took office. The number of homes completed by these firms increased by just 4,067 in 2012, and the number of affordable homes built last year actually fell by 26%. 

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