Readers pay dearly for freehold
A couple bought their freehold to escape £9,000-a-year ground rents. Now Taylor Wimpey refuses to help, by Sam Brodbeck
‘We felt they had us over a barrel. In the end we simply accepted’
Leaseholders facing spiralling ground rents were given some relief earlier this year when Taylor Wimpey scrapped its unfair terms – but those who had already paid high costs for their freehold have been left out in the cold.
Some of Britain’s largest developers have come under fire after it emerged tens of thousands of new-build houses have been sold under leasehold terms, rather than freehold.
That allowed housebuilders to boost profits by selling on the freeholds to investors hungry for the income from ground rents, some of which have small print that means they double over time.
After campaigners highlighted how the terms meant thousands of people risked being trapped in unsellable homes, in April this year house-builder Taylor Wimpey bowed to pressure and said it would change leases so they rise with inflation. It also set aside £130m to compensate investors who had bought freeholds, who would now face lower income.
The redress scheme is open to people living in homes where either Taylor Wimpey or a third-party investor is the freeholder.
Yet homeowners who bought their freehold to avoid the doubling ground rents, but before the redress scheme was announced, are excluded from the scheme and face thousands of pounds of losses.
Trevor Nowell, a former head teacher, 79, paid £38,000 to buy the freehold on his £320,000 Taylor Wimpey house in September last year. Mr Nowell and his wife, Margaret, were facing accelerating ground rents, which would have risen from £295 a year to £9,440 a year over 50 years.
In addition to buy-out costs for the freehold on their Lancashire home they had to stump up £4,000 in legal fees. Under rules set out in the 1967 Leasehold Act the right to “enfranchisement” also requires homeowners to pay the freeholder’s legal and valuation fees. Leaseholders normally have the right to buy freeholds two years after the property purchase.
To make matters worse, it transpired Taylor Wimpey had sold the freehold on the Nowells’ home to E&J Capital Partners, a major investor in ground rents, for just £8,000 three years previously.
A spokesman for E&J, which owns 40,000 leases, said the nearly five-fold increase in its price had been driven by falling interest rates.
“We felt we needed to resolve the issue because of our doubling ground rent,” said Mr Nowell. “It feels like a real rip-off but they had us over a barrel so we accepted. All that’s left is to appeal to their moral judgment.”
For current leaseholders, Taylor Wimpey will convert the existing leases into ones with more reasonable terms. Mr Nowell said the reason he bought the freehold was to avoid the soaring ground rents, and now feels like he has overpaid unnecessarily.
“I think Taylor Wimpey should be treating us as they have or are going to with current leaseholders,” said Mr Nowell. “They should compensate us for the difference in value between the old and new leases.”
Sebastian O’kelly, of the Leasehold Knowledge Partnership charity, said: “With the lease altered to ground rents linked to inflation, Mr Nowell would have been in a position to buy the freehold for far less than he did.”
A Government consultation on “tackling unfair practices” in the leasehold market closed in September and is set to lead to the ban of sales of houses on leasehold terms and introduce controls on ground rents.
But Justin Madders, the MP for Ellesmere Port and Neston, where thousands of homeowners have been affected, said the proposals did not go far enough.
This week he will propose a Leasehold Reform Bill, which would create a simple calculation to replace the existing cumbersome and expensive enfranchisement process. “Abuses of the leasehold system have made huge profits for developers, while causing misery for thousands of people,” he said.
“The current system allows freeholders to delay and put off people who want to buy their freehold. The whole process is extremely costly, archaic and lacks transparency.”
A Taylor Wimpey spokesman said it had no involvement with the Nowells’ freehold purchase and confirmed the couple did not qualify for the redress scheme.
The Nowells bought their freehold to escape ground rents that would have hit £9,440 a year