March 26, 2017

Disgraceful leasehold houses reported in The Guardian today

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– Urgent issue for MPs of parliamentary group on leasehold next month
– Onerous lease terms in taxpayer-aided Help To Buy scheme
– Ground rents doubling every 10 years from plc housebuilder

guardianleaseholdhousesThe disgraceful and increasingly widespread scandal of plc housebuilders selling leasehold houses is reported in The Guardian today.

It can be read here

The article, based on research by LKP, reports cases of leasehold houses from plc housebuilders having escalating ground rents that can reach £9,360 a year.

These houses are now unsellable as resales through normal estate agents and LKP is informed that mortgage lenders will not lend against them.

Worse still, many of these leasehold houses have been bought with taxpayers assistance through the Help To Buy scheme.

The Guardian quotes Justin Madders, Labour MP for Ellesmere Port and Neston, describing the situation as “morally indefensible”.

“I have had a number of constituents contact me, saying they were aware at the time of purchase that the freehold was extra. However, they didn’t know the original developer sold the leaseholds to private investors who have ruthlessly exploited the law to line their own pockets.

“The prices they have been quoted to buy the freehold have rocketed beyond any reasonable sum people can afford. I have found constituents are unable to afford the fees being quoted and there are extortionate charges associated with obtaining permission to alter the property. Just over £2,500 was quoted for permission just to build an extension.”

At Persimmon’s Agusta Park development in Yeovil, Somerset, two-, three- and four-bedroom homes are being sold leasehold.

The Guardian could find no prominent mention on Persimmon’s website, or in the brochure, that the homes were leasehold.

Here ground rents were £150, then £190, going up every 10 years using a formula linked to the RPI.

The sales staff were also repeating gibberish that leasehold houses are “virtually freehold”.

LKP / Carlex successful persuaded McCarthy and Stone to drop this nonsense term in the summer.

Persimmon is quoted saying: “Persimmon sells a mixture of both leasehold and ­freehold properties. As Persimmon has acquired other ­companies over the decades, it has inherited the freehold reversions of leasehold properties sold by those businesses. There are around three million leaseholders in Britain. All Persimmon leasehold houses carry an extremely long ­999-year lease and customers are informed at ­purchase what type of property they are buying.”

LKP would say this statement is utter rubbish, including the figure of three million leasehold properties (the official figure used by government is 4.1 million).

Persimmon has chosen to build leasehold houses at sites across the country. This has nothing to do with inheriting freehold reversions.

Taylor Wimpey is quoted saying: “At Taylor Wimpey the vast majority of our houses are sold on a freehold basis. However, in a small number of developments, ­predominantly in regions of the ­country where it is common practice in the market, we sell houses on a leasehold basis. Throughout any sale process, customers are fully informed of the ownership structure of the home. If a customer is interested in such a property, the sales team advises them whether the property is being sold on a leasehold basis.”

LKP would say this, too, absolute nonsense. In no area of England and Wales is it “common practice in the market” to sell on a leasehold bases.

There are leasehold houses in South Wales former mining communities, which exercised the former MP George Thomas in the Sixties. There is a cluster of leasehold houses in Cramlington, in Northumberland, built in the Seventies.

Nowhere in the country is it a widespread practice to build leasehold houses.

The Leasehold Knowledge Partnership is determined to make leasehold houses top of the agenda for the All-Party Parliamentary Group on leasehold and commonhold which meets on November 16.

It has attracted 43 MPs and lords, and is chaired by Labour MP Jim Fitzpatrick and Tory Sir Peter Bottomley. Members include Sir Keir Starmer, Emma Reynolds and Barry Gardiner.

The Guardian reports Sebastian O’Kelly, of LKP, saying:

It is disgraceful that plc housebuilders are building leasehold houses that ordinarily – and until recently – would have had freehold title. This is an erosion of the wealth of ordinary people to the advantage of the rich.

“Young people, after years of paying rent, finally buy a home and then find they are still, in fact, tenants – which is what a leaseholder is – with all the vulnerability that that implies.”

“The housebuilders are evasive over this issue and it beggars belief that the outrageous ground rent multiples come from household-name builders. There is no attempt to justify the adoption of leasehold tenure for these houses, which are not complex communal sites such as blocks of flats.

MP Justin Madders is calling for a ban on leasehold for estates of 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.”

Comments

  1. Michael Hollands says:

    Persimmons and Tayloy Wimpeys attitude towards this issue is very disappointing.
    I spent a lifetime in the employment of Taylor Woodrow and found them to be a very honourable and public spirited company.
    Perhaps both Persimmons and Taylor Wimpey would like to come on here and justify their leasehold policy.
    Is it just to create more profit or can they show it is a benefit to those who desperately need a home

  2. Fernwood Village – Newark

    Local villagers are being charged by Firstport Property Services Ltd, a property management company for keeping pets, planting trees, having solar panels and changing their mortgage provider. Firstport Chief Executive Officer is Nigel Howell same CEO of Firstport Retirement.

    A maintenance strategy group set up by Fernwood Residents’ Association and the parish council has taken its concerns to Firstport Property Services.

    Firstport’s company’s charging policies have been raised at Westminster by Newark MP Robert Jenrick, who wants the issue to be debated in Parliament. Residents claim charges they knew nothing about included tenants of rental properties being asked to pay £76 to have a pet.

    It is claimed that if their contract with FirstPort specifies it, those owning the freehold or leasehold on their properties who wish to change mortgage provider have to seek permission from the company first.

    The cost associated with re-mortgaging a property was set at £138 in April, an additional fee to those required by a mortgage adviser or lender.

    Home-owners must pay £300 to FirstPort if they want to alter their own properties by, for example, adding solar panels or a conservatory.

    Alterations carried out without the prior consent of FirstPort incur a fee of £424.

    The charges are on top of a standard maintenance fee paid to FirstPort by Fernwood residents, which covers grass-cutting in public open spaces and sweeping parking bays.

    Mr Jenrick said: “The heart of the issue is the charges levied against freeholders for doing simple things that homeowners normally take for granted, such as re-mortgaging or adding solar panels or a conservatory. The existence of these charges is a disgrace and they are set very high.

    “FirstPort is profiteering from a model that should not exist and needs to be stopped.”

    • Michael Epstein says:

      Chas,
      You say that Firstport impose a charge of 76 pounds if a resident wishes to keep a pet?
      Does that include a leech or is a leech part and parcel of the management contract?

      • Michael Hollands says:

        It is First Ports boast that they have an understanding of what’s important to their residents.
        And they do that by responding with a minimum of fuss, so that they can help them live an independent worry free life.
        This of course is a moneyspinner as many of the extras or alterations will carry a First Port levy even though they contribute nothing.
        By the way do First Port impose a charge if a resident wishes to keep a Toy Boy.

  3. Michael Epstein says:

    Following the intervention of Newark MP, Robert Jenrick, Firstport have agreed to drop the charge for alterations to freehold houses.
    However potential purchasers of new build homes at Fernwood need to be very wary.
    New build homes are being constructed by Persimmon doubtless on a potentially ruinous leasehold basis.

  4. Michael`s,

    Further to my last posting, recent information sent to me where a spokesperson for “Barrett David Wilson Homes” the main house builder on Fernwood said:
    It was stated by the spokesperson; It was standard practice to appoint a Management Company. This was in line with their long term agreement in place with Firstport. This gives continuity in the management and maintenance of Fernwood Village, and are concerned residents are expressing dissatisfaction with Firstport who manage the development.

    Mr David Heath, Chairman of Fernwood Residents Association, stated many residents did not know about the extra charges which are on top of a standard maintenance fee paid to Firstport by residents covering grass-cutting and sweeping parking bays.

    Residents require permission to paint front doors and to plant trees or shrubs.

    Firstport had arranged a meeting after hearing residents complaints, but the venue they chose had been closed (how fortunate) so a further meeting needed to arranged.

    The areas most concerned by residents are the same as other Firstport Companies Contracts and Accounts.

  5. Michael,
    Further to the last posting.
    Fernwood Village
    Firstport Property Services Ltd have back tracked since the problems were mentioned in the media.

    •Fees for re-mortgaging – are legally binding as mentioned in the Freehold Contract?
    •Permission Certificates – are still required but the charge of £300 no longer applies.
    •Selling Houses – the sellers pack better known, Welcome Packs are no longer a requirement.
    •Void Charges – should not be subject to an enforceable covenant to pay service charge.
    •Clause 8.2 – ditto void charges.
    •misallocation of service charge expenses- charged in error to schedule 1 – accounting – refund due.

    Fernwood – locked into 5 year contract.

    Fernwood Residents Association have made an official complaint to Newark & Sherwood District, who were supposed to have approved the Village Maintenance Plan but didn’t. Under the Freedom of Information Act it was revealed written confirmation was not available showing any documentation of approval for the Maintenance Plan from either Newark & Sherwood District or builders Barrett.

  6. The term “Virtual freehold” is used to describe a 999 years leasehold at “peppercorn” ground rent .

    Leases which include ground rent rising every 10 years is really a ” Virtual Rip-off Agreement “.