It was widely reported last week that Taylor Wimpey has set aside £130million to correct the rent review terms of the good rent in some of their new build leasehold properties.
Ground rent is normally an annual sum paid by a leaseholder to their freeholder. They are usually very modest sum, and some even set at ‘peppercorn’. The problem with the ground rent in the leasehold properties in question, is that they are set to double every 10 years.
This means on a 125 year lease with a starting ground rent of £100 will rise to £3,200 in just the first 50 years!
Whilst ground rent is a fairly not as important in a lease as service charges, if you don’t (or can’t) pay your ground rent, there are serious repercussions and your freeholder could as a drastic measure apply to forfeit your lease and repossession your home.
Ground rent is also an important factor in calculation of the premium payable for a lease extension as well as the compensation required if you wanted to buy the freehold.
In addition many potential buyers and lenders will be put off buying/lending on these leasehold properties with such extortionate terms.
So what can the poor home owners do about it?
The exact details of the compensation scheme has not been disclosed so it is not clear if you qualify for any compensation if you did not purchase the leasehold property directly from Taylor Wimpey, or what it means “to alter the terms of the doubling lease to materially less expensive ground rent review terms, with the group bearing the financial cost of doing so”.
Clauses in a lease can only be amended by mutual consent of the parties, and it seems unlikely that a freeholder would voluntarily agree to alter the rent review clause given that it is likely to generate some serious income long term.
With such onerous rent review terms, you would expect your conveyancing solicitor to have highlighted this to you. If you feel that they have not properly advised you about it then you may consider a formal complaint or even claim against them for professional negligence. But beware of time limits that apply so don’t delay and seek advice sooner rather than later.
I am sure this scandalous practice is not limited to Taylor Wimpey and it seems that they came under the spotlight after an investigation by the Guardian last year. Time will tell if other developers will follow suit and do the right thing…