£130m bill for lease scandal
Housebuilders revenue hit by pay-off cost
BY SIMON READ THE leasehold scandal that engulfed housebuilding firm Taylor Wimpey earlier this year has led to a 24 per cent slump in their profits.
A £130million compensation bill to pay for their rip-off leaseholds meant profits dived 23.7 per cent to £205million in the first six months of the year.
Many homebuyers who bought properties from the builders between 2007 and 2011 were forced to sign a leasehold contract that contained an outrageous doubling clause.
It meant their ground rents, which are paid to the freehold owners of the property, doubled every 10 years.
The shocking price increases would eventually leave leaseholders unable to afford to pay the rent and the terms were so bad that homes were unsellable.
Taylor Wimpey flogged the freeholds to third parties and the £130million compensation bill will go towards paying off freeholders, who will no longer be able to line their pockets via the rip-off clause.
The company said they expect the payments to customers to be “spread over a number of years”, adding: “The process of negotiation with the owners of the freeholds to these leasehold properties is ongoing.”
MPs called the scandal the “PPI of the housebuilding industry”.
It may spread to other housebuilders who had similar rip-off leasehold deals. Pete Redfern The scandal forced the Government to act last week when they agreed to ban the sale of leasehold new-build homes and pin ground rent at a peppercorn rate.
Stripping out the leasehold provision, Taylor Wimpey’s pre-tax profits climbed 25.7 per cent to £335million.
They completed 6580 homes, a 9.3 per cent increase from a year earlier, and said average total selling prices climbed 6.3 per cent to £253,000.
Boss Pete Redfern glossed over the scandal by saying “our first-half performance has been strong”.
But analysts at Killik & Co downgraded the company’s shares, saying: “We do not believe the current valuation reflects the potential for further liabilities in relation to unfair leasehold practices.” Oil RSA RBS J Sainsbury SSE Severn Trent Serco Sports Direct Shell Sky Smith & Nephew Smith WH 657.0 250.6 248.3 1381.0 2229.0 112.2 379.3 2160.0 968.0 1316.0 1781.0 +4.5 +2.0 +3.5 +2.0 -11.0 +1.2 +0.2 +8.0 +3.0 -4.0 +21.0 REMEMBER super chain Safeway? They v from our high streets in being taken over new by Morri deal means the next brand year on a range sold of gro at McColl’s 1300 co stores and 350 newsag are pleased to be revi Safeway brand,” s Morrisons bos David Potts. Euro Australian Dollar Bulgarian Lev Canadian Dollar Croatian Kuna Czech Koruna Egyptian Pound Hungarian Forint New Zealand Dollar Polish Zloty South African Rand Swiss Franc Thai Baht Turkish Lira UAE Dirham US Dollar 1.090 1.599 2.034 1.590 7.797 27.321 23.59 312.290 1.696 4.415 16.768 1.238 41.404 4.356 4.634 1.287