The much-reported ground rent scandal – what is at issue?
You may have seen reports about this in the press. Ground rents – the annual payments leaseholders make to the freeholder, the owner of the land - have in the past often been quite low. However, some developers -Taylor Wimpey amongst them - have begun selling houses as leasehold that traditionally would have been freehold, with clauses in the lease that allow the ground rent to rise dramatically over the years.
This has meant that owners of these properties are having problems selling them on, as some banks and building societies are refusing to grant mortgages to prospective buyers because a clause in the original leasehold agreement means owners will be expected to pay spiralling ground rents.
Buyers have complained that their attention was not drawn to the future ground rent increases, as they were encouraged to use the conveyancing services provided by the developer, and not employ their own solicitor.
Our advice would always be that clauses like this should be brought to the buyer’s attention; had this happened, the original buyers would have had the opportunity to walk away from their purchase, saving themselves time, money and stress. Not to bring this matter to the attention of the buying is clearly negligence on the part of the conveyancer.
Climb-down by Taylor Wimpey
In its AGM in April, Taylor Wimpey made a statement saying that it will pay out £130m to some of the buyers of its new-build leasehold homes who had found that their properties had been rendered practically worthless by their ground rent contracts.
If you are buying a property, particularly a new-build home, then we can offer you the advice on the clauses in the sale contract, and explain what their implications might be.