Ground rent: major housebuilder and top mortgage lender halt crippling charges while solicitors advise against buying homes with large fees

As a major housebuilder and a top mortgage lender act to halt crippling charges, the rest of the industry must surely follow.

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Builder Taylor Wimpey apologised last month and set aside £130 million to sort out its part in the ground rent scandal.

Selling houses and flats between 2007 and 2011 with leases where the ground rents doubled every 10 years was “not consistent with our high standards of customer service and we are sorry for the unintended financial consequence and concern that they are causing,” it said.

The charity Leasehold Knowledge Partnership, responsible for bringing this to public attention, applauds the company for taking this decision.

The ground rents terms — typically rising from £295 to £9,440 in 50 years — were so onerous that home owners found they could not sell their properties: their buyers would be advised by solicitors to pull out and mortgage companies would refuse loans.

The open question now is, what effect will Taylor Wimpey’s announcement have on the rest of the market?


The doubling ground rent game was effectively ended by Nationwide Building Society’s announcement last week that it would decline future loans on any new properties where it applies. Other lenders will almost certainly follow suit. In broad advice, Nationwide said the maximum acceptable ground rent should be 0.1 per cent of a property’s value — for example, £300 a year for a £300,000 property. 

This is not such a brilliant idea if you own, say, one of the £25 million flashy penthouses at Neo Bankside, beside Tate Modern. It would bump the ground rents up to a possible £25,000 a year, instead of the far more sensible £850 a year they are at present.

But London penthouses are not really Nationwide’s core market. In general, its ban on unfair ground rents is welcomed. It shows the market is correcting itself in the face of widespread disapproval of onerous ground rent terms.

Builders beware: Taylor Wimpey has apologised for selling leasehold homes with ground rents that double every 10 years. It has set aside £130 million to alter lease terms and make ground rents cheaper (Alamy Stock Photo)

Many housebuilders are also hitting reverse gear, particularly on leasehold houses. Just over 38,000 of these have been registered with the Land Registry over the past five years. Prime Minister Theresa May, among others, can’t understand why. She told the Commons in March: “I do not see why new homes should not be built and sold with the freehold interest at the point of sale.”


The Leasehold Knowledge Partnership advises would-be buyers of leasehold houses to insist on buying the freehold, and copy in correspondence to the chief executive and to the housing minister, Gavin Barwell. This has resulted in the immediate offer of the freehold in dozens of cases.

Londoners bear the brunt of leasehold: 94 per cent of newbuild registrations on the Land Registry in central London are for leasehold properties. Leasehold accounts for 44 per cent of all new-build registrations, and they totalled £13.7 billion in value in 2015. Last year’s Land Registry figures are not yet available.


The Leasehold Advisory Service quango estimates that developers earn £300 million to £500 million a year from selling freeholds on to investors, often anonymous, who can then hide their beneficial interest behind nominee directors. Leasehold rules may well be raised as an issue  by the main parties in the impending general election, with the focus likely to be on Help to Buy. 

Taxpayers have spent millions underwriting loans, only to find that they have helped pitch a generation of first-time buyers into unwanted longterm tenancies — which is what leasehold means.


The market is self-correcting already, thanks to Nationwide and the other lenders expressing concern, but politicians may well want to give it more help. 

Taylor Wimpey’s £130 million is intended for a fund to convert “doubling in a decade” leases to less onerous ones. This is the only way of assisting flat owners, but leasehold house owners may want to buy the freeholds to their homes at the prices originally offered by the company, before it sold them on to investors. We will see whether there is any movement on this.

The new government will almost certainly put new leasehold rules on the statute book, last altered in the 2002 Commonhold and Leasehold Reform Act which introduced commonhold, where all flat owners own a share of the freehold. That’s the way the rest of the world, including Scotland, organises flat ownership. Maybe it is time for England and Wales to make commonhold mandatory and end leasehold tenure, which is the source of so much concern. 

Sebastian O’Kelly is trustee of the Leasehold Knowledge Partnership.

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