Last Saturday was not a good day for Taylor Wimpey boss Peter Redfern. The Guardian filled a page with the cries of aggrieved buyers who could not sell their homes because a clause in their lease doubled the ground rent every 10 years, making the homes worthless, they said.
Trading ground rents was for a long time a quiet backwater. Steady income from ageing mansion blocks was the core product. But no longer. Berkeley Group has made a £136m profit in the past two years from selling ground rents generating £153m a year; political pressure for reform is on the rise; and last week the man tipped to be the next leader of the Labour party, Kier Starmer, joined the campaigning All Party Parliamentary Group on Leasehold, led by the entirely respectable Sir Peter Bottomley.
If you want to plumb public anger, take a look at www.leaseholdknowledge.com, a site run by Sir Peter’s ally, Sebastian O’Kelly.
Taylor Wimpey had been operating the double-up formula since at least 2007. Some of these buyers are now trying to sell. Valuers for the mortgage companies of those trying to purchase say some are worthless. Really? Surely not?
On Sunday an e-mail arrives from Sean Greenwood, whose solicitor wife found her small flat in a block of 32 in Dudley, purchased for £101,000 in 2010, was worth nothing because of the “double” ground rent provision in the 125-year lease. I was not the only one to receive the e-mail. So did the dozens of MPs with property interests. “We have now had it clarified that the rent will double every 10 years,” said Greenwood. “From the current £250 a year to £8,000 a year from 2059. The calculations show that over the life of the lease (125 years) the freeholder will invoice the 32 apartments for a total of £21,672,000.”
As Greenwood points out: “The future is not the problem. We cannot sell in the present because of our lease.” It would be interesting to hear from the RICS. Surely the place is worth more than nothing?
Meanwhile, what does Taylor Wimpey have to say? Well, to its credit, ground rent “doubling” was discontinued five years ago. Not something the Guardian thought fit to mention. “We can confirm that since around 2011, ground rent increases for Taylor Wimpey leasehold properties have been based on the retail price index and increase every 10 years in line with the index, as per the current industry standard.”
A footnote: on Tuesday Taylor Wimpey announced that Angela Knight had joined the board. Knight is chairman of the Treasury’s office of tax simplification. Just the woman to lead an inquiry into ways the firm can explain ground rent liabilities simply.
PS: Pete Redfern had a good day on Monday. The tie-less 46-year-old was up before the Communities and Local Government parliamentary committee – an irritatingly toothless group asking lame questions on just why housebuilders are not obeying government instructions to up their game and build 200,000 homes a year right away. Redfern outshone his peers, David Jenkinson of Persimmon and David Thomas of Barratt. The two Davids played the traditional defence: “Give us more green belt! We haven’t got enough labour!”
Redfern was far more nuanced during the 100-minute hearing, patiently explaining the facts of life to MPs. “The biggest issue is cyclicality,” said Redfern. In other words, why should the private sector risk capital to build homes that might not sell due to government incompetence in managing the economy?
What a whopper
Great news from AXA last week. Work on 22 Bishopsgate, EC2, is to restart following a post-Brexit pause. The 67-floor skyscraper containing 1.4m sq ft of lettable space is now due to be completed by 2019. Until last week I wondered how architect Lee Polisano of PLP, guided by Sir Stuart Lipton, managed to squeeze so much space on to a footprint once occupied by what was to be the 900,000 sq ft Pinnacle tower. No longer. Most of the pictures show the tower end-on. Last week I saw 3D model. Side on, it’s a whopper.
