Advice - Leasehold doubles every ten years - cost of buying?

bobsaunders

Hi,

Hoping someone can advise or help please. Question at the end.

We bought a property in 2014 privately from a seller with a 999 year leasehold (990 left), it turned out the property was a Taylor Wimpey home - although we were not told that at the time.

We were advised by our solicitor during the sale that the leasehold costs were "odd", but not advised of the longer term implications - and sadly, not something we thought through fully in the excitement of buying our first home together... you know you read the summary advice, but not the pages and pages of small print.

Google - taylor wimpey leasehold

In short, it turns out we bought a Taylor Wimpey home, with a contractual clause in the leasehold which doubles every ten years - not problem we thought... first time buyers, young professionals £295 a year, doubling every 10 years, even if we stayed 20 years it was viable.

It appears that some people do think longer term.. now we have an unsellable house, and our neighbours all along the street have similar situations.

It appears our neighbours have reached out to the leaseholder to try and buy the freehold, instead they were offered 20k for the "contractual clause" to be removed for the doubling of ground rent every 10 years... :mad:

Running the sums through a couple of leasehold calculators they say that the freehold is worth 5k. Now.. bearing in mind that it doubles every 10 years... this makes it more valuable to the owner.. because in 50 years time it is circa xxk a year.

Does anyone know of anyone who has successfully gone through the first tier tribunal after buying a taylor wimpey home with a similar leasehold ground rent clause?

Thanks in advance.

eddddy

bobsaunders wrote: »

Does anyone know of anyone who has successfully gone through the first tier tribunal after buying a taylor wimpey home with a similar leasehold ground rent clause?

If the ground rent was clearly stated in the lease, you don't have a basis to challenge it at a tribunal.

bobsaunders wrote: »

Running the sums through a couple of leasehold calculators they say that the freehold is worth 5k. Now.. bearing in mind that it doubles every 10 years... this makes it more valuable to the owner.. because in 50 years time it is circa xxk a year.

Did you find a calculator that allowed you to specify that your ground rent doubles every 10 years? (If so where?)

You won't get the right valuation just by specifying the current ground rent.

bobsaunders wrote: »

We were advised by our solicitor during the sale that the leasehold costs were "odd", but not advised of the longer term implications...

...It appears that some people do think longer term.. now we have an unsellable house,

In which case, you might have a claim against your solicitor

bobsaunders

Hi Edddy,

Thanks for your reply. I do not think i was clear in my original post.

Ideally i would like to know if anyone has got a fair valuation on the value of their leasehold based on the sub-clause.

Are we talking about an extra 10k? 15k? 20k? for the freehold, due to the clause of doubling ground rent.

I am aware online calculators only go so far - most place the value at around 5k (without the clause/unique circumstances).

I suspect it will end up at first tier tribunal trying to agree a price.

re. solicitor - I do not think i have a leg to stand on with the solicitor - three years ago now. The unsellable factor has only just made itself known in the last few months with multiple buyers dropping out up and down the street. However, we are reviewing the written documentation with another solicitor and a telephone call will be made tomorrow - they have highlighted the clause, but not pointed out in writing the implications. Just advised us to look at it.

TIA.

flashg67

no good to you now, but I believe the government are looking into banning this practice - most big builders claim to have stopped it recently anyway.

You'll find or course that the leasehold is worth much more to the company that Wimpey sold it too, precisely because of the income it generates - the internet is full of tales of people with a leasehold worth a nominal amount, say £3k, being asked for 10 times that amount.

It's a scam that is hopefully being stopped, but too late for people already trapped.

I'd make my own enquiries as to what the leaseholder wants to sell it for. Might be worth biting the bullet now to avoid problems further down the line, unless you intend staying there forever, and can put up with the increases.
Don't know if this helps - https://www.gov.uk/leasehold-property/buying-the-freehold

Not sure whether you'd have a case against your original solicitor too, if they still exist?

bobsaunders

Hi flashg,

Yes, your correct TW (Taylor Wimpey) has stopped this practice re. the clause. Primarily because it has gone to a all party PM discussion/working group.

My thinking is exactly what you have mentioned - buy it now before this gets worse, and if the law changes to say that what they did was wrong/illegal then proceed with legal action to recover my costs at a later date.

There is a link on the telegraph has the example of someone being charge 89 times the cost of the ground rent. (i can not link as a new member).

"Homeground’s freehold purchase price was £13,350 – 89 times the £150 a year ground rent. Homeground refused to tell Mrs Kendrick or Telegraph Money how this was calculated."

They believed it was worth 4-5k. Next steps would be the First tier tribunal.

TrickyDicky101

On what grounds would you complain about the cost? Don't like it you have a statutory process to go through. Trouble is, from the seller's point of view, the doubling every ten years is valuable. Hence, the price you will pay will necessarily reflect this value.

Hoploz

Someone I know has the sane thing. He bought 3 years ago but it didn't come up when he was buying (ftb). It came up when he attempted to sell last year. It's currently with solicitors but they have assured my friend they will be able to reclaim all costs (approx 15k) from the solicitor who dealt with his purchase conveyancing as they were negligent in not identifying this at the time.

martinsurrey

bobsaunders wrote: »

Hi flashg,

There is a link on the telegraph has the example of someone being charge 89 times the cost of the ground rent. (i can not link as a new member).

"Homeground’s freehold purchase price was £13,350 – 89 times the £150 a year ground rent. Homeground refused to tell Mrs Kendrick or Telegraph Money how this was calculated."

They believed it was worth 4-5k. Next steps would be the First tier tribunal.

they believed it is £4-5K because the online calculators mainly work on flat ground rent.

£295 per year for 80 years (roughly the horizon for GR calcs) with a 5% discount rate has a current value of £4,592

£295 per year, doubling every 10 years, for 80 years with a 5% discount rate has a current value of £26,116 (89 times the CURRENT ground rent).

That is the kind of calculation the tribunal look at, it wont end well if you expect it to be under £20k.

TW, have done nothing illegal, (I don't look at the moral side, its business).

The current freeholders have don't nothing wrong (I don't look at the moral side, its business).

Your solicitor has dropped the ball, that's your only hope of a cheap resolution.

justme111

martinsurrey wrote: »

Your solicitor has dropped the ball, that's your only hope of a cheap resolution.

Interesting why you think so , apparently they were advised on lease clause and calculated they could afford it even doubling every year (so they understood it was doubling) at the time.

martinsurrey

justme111 wrote: »

Interesting why you think so , apparently they were advised on lease clause and calculated they could afford it even doubling every year (so they understood it was doubling) at the time.

A doubling lease clause makes a property almost un saleable.

Now, the buyers solicitor might mention that the reground rent doubles every 10 years, and the buyers think "well in 20 years its £600 a year, we can afford that" because their horizon is on their lifetime.

BUT the solicitor should know more, that's why the OP paid them, they should KNOW that the doubling GR will vastly increase the Freehold purchase price (not something that buyers think about), that the REAL price of such freeholds actually increases over time (the rise in the rent is more than long run inflation) so as the property ages the freehold becomes MORE expensive in real terms, so when they come to sell in 20 years time the Freehold will cost something of the order of £75-100K.

Just mentioning the terms of the lease doesn't cut it IMO, they weren't paid to read the lease to the OP, they were paid to interpret the lease and make sure it was fit for purpose , such an onerous term in the lease should have been hammered to death by the solicitor.

Thats why I would put some blame on the solicitor.

justme111

I take your point, speaking as a lay person I agree that is what one pays solicitor for. On another hand one could argue that those properties are obviously saleable as the whole street bought them once, that they have an option of removing the clause at a cost which would have been factored into original price.