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

The Sunday Telegraph - Money & Business - - Money -

‘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

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