HOMESEEKERS USED TO ACCEPT the bland assurance of their lawyer that ground rent was a thing of no great concern.
Such advice has over the years helped to cover up what MPs have described as the PPI — payment protection insurance — of the housebuilding industry and lawyers now advise clients to be wary of ground rent.
The concept’s failure has led Taylor Wimpey to make £130 million ready to mollify the hundreds of people who bought leaseholds.
Many were unaware when they bought their home from the UK housebuilder that the property’s freehold had been sold to private companies, who can then collect the ground rent. For example a ground rent of £250 in 2010 will hit £8,000 within 50 years, which can make a flat near-unsellable.
One possible solution is to buy the freehold but, of course, the owner will then add a huge premium.
The issue is relevant in Dalston, where shoppers and clubbers, among others, will have noticed that Taylor Wimpey is selling flats in FiftySevenEast, the big, round block rising up next to Kingsland station.
Loving Dalston has been told of flatseekers being shown over “the Dustbin”, as the building has been dubbed, and having the ground-rent arrangement presented by the estate agent as a benefit, even though in Parliament it has been called “a national scandal”.
Unsold flats in the Dustbin cost more than half a million pounds. The Hackney viewer told Loving Dalston that despite a sign on the building offering viewing, a show-flat inspection had not been easy to arrange: the impression was given that the Far East and Russia were the sales target areas.
The viewer was also told that no (so-called) affordable flats were on offer.
Sebastian O’Kelly, of Leasehold Knowledge Partnership, told Loving Dalston: “Ground rents are out of control in London. Developers have jacked them up, increasing the value of the freehold to a block of flats, which is then sold to murky and anonymous investors, often based offshore.”
Buying the freehold of flats was an attractive investment for those wanting to hitch a ride on homeowners in the UK. But developers had been too greedy.
Mr O’Kelly explained: “The Nationwide building society decision not to lend against properties with doubling ground rents and ground rents of more than 0.1 per cent of a property’s value… has blighted perhaps 100,000 homes with high ground rents, which are now unsellable with mortgage finance.”
The Leasehold Knowledge Partnership was deluged with buyers saying they could not buy flats because mortgage finance had been withdrawn.
O’Kelly added: “Ninety-four per cent of central London newbuild is leasehold and half the homes in the capital are leasehold, so this is a pressing issue in London.”
Hamish Scott 260517
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