National housebuilder Taylor Wimpey has apologised to home buyers this week after growing criticism of its policy, between 2007 and 2011, of selling new build houses as leasehold properties. This meant that the builder owns, or may have sold on, the land the houses stand on, and charges annual ground rent at a rate that frequently doubles every ten years. The first of these hikes in ground rent is therefore kicking in this year.
Taylor Wimpey is just one of several housebuilders in the UK who sold houses on a similar basis. Unwitting buyers who were not adequately advised by their solicitors or the building companies’ sales teams have been left with onerous ground rent payments to pay, as well as the risk that the freehold to their property, along with their lease, has been sold to investors. As well as being unattractive to buyers, ground rent is one of many factors considered by mortgage companies when deciding whether to lend on a property, and so the current owners may find affected properties harder to sell in future.
The only way to get out of the increasing ground rent payments is to purchase the freehold, something that many buyers were wrongly advised by salesmen could be done for a relatively small amount in the future. The freeholds were then frequently sold to investors, who are now demanding extortionate purchase prices, in some cases upwards of £40,000. Failure to pay ground rent is likely to be a breach of the lease, for which the Landlord has the ultimate remedy of forfeiture.
Taylor Wimpey has set aside £130 million to deal with the issue, including negotiating with freehold owners to change the provisions of leases.
This tale just goes to show the importance of using a knowledgeable and thorough conveyancing solicitor who can advise you fully on the property you are purchasing, to avoid any unpleasant surprises in future.