Now City blue chips cash in on rip-off ground rents

SOME of the biggest names in the city are are cashing in on rip- off leasehold deals.

Blue-chip investment firms Schroders, Old Mutual and Investec are just a few of the big-name backers of Ground Rents Income Fund (GRIF) that make money from buying up ground rent fees for houses and blocks of flats.

Leasehold homes make up 11pc of the fund’s portfolio and, of that, 18pc of the homes are subject to doubling ground rents.

The controversial leasehold schemes, which in some instances see ground rents double in ten years, have left some householders unable to sell ‘ unmortgageable’ homes because banks refuse to offer loans to buyers.

The fund yesterday revealed it would be paying investors a dividend of 0.98p per share next month, despite the backlash from the controversial fees.

Schroder – its biggest backer with 13.6m shares – will make £133,574, while Old Mutual – with 8.4m shares – will make £82,320.

Sebastian O’Kelly, trustee of the Leasehold Knowledge Partnership, said the firms were engaging in ‘parasitism in its worst form’. He said: ‘It’s a great way to hitch a ride on the UK residential property market. It’s a way of disparaging the young and is a generational wealth erosion for them.’

Schroders said: ‘We are aware that 4pc of the total ground rent income is derived from doubler assets. We have been and continue to engage with management on these specific assets.’

Old Mutual did not want to comment. The ground rent fund was set up in 2012 and claims that most of its portfolio is invested in ground rents that increase in line with the retail prices index, but 18pc of its property is attributed to doubling ground rents.

It made profits of £20.2m in 2016, up from £12.5m the year before. It has £125.7m of assets, according to its most recent annual report, largely from investment in ground rents.

Last month the Government proposed a ban on new-build leaseholds, saying that ground rents should be restricted to as little as zero, with Communities Secretary Sajid Javid describing the process as unjust. Earlier this month James Agar, alternative investment fund manager to GRIF, said: ‘We welcome the Government’s consultation. We will submit our own response to the consultation, which will be avail- able to view on our website.’ He added: ‘We are committed to being a socially responsible landlord, working hard to treat all leaseholders in a simple, honest and transparent manner.’