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”.
“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
An 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.
It 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.
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.
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.
At last! Peter Redfern admits quality is being compromised in the rush to build new homes
Taylor 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.
Pete Redfern Taylor Wimpey CEO is Corbyn’s appointed housing tsar.
It 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.
It 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.
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.
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?
“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.
In 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%.