Countryside Properties has bought back some freeholds and pledged to ditch some “doubling” ground rent clauses, as the ground rent debacle continues.
The major housebuilder has agreed to take back some of the freeholds with a “doubling rent review clause” that it sold to investor E&J Capital Partners, while E&J has pledged to acquire “no further leaseholds containing similar 10-year doubling of ground rents”, following negative media coverage.
This move follows Taylor Wimpey’s allocation of £130m to a “ground rent review assistance scheme”.
E&J has sent a letter to affected home-owners, informing them that: “Having confirmed that the lease upon which you hold your property contains such as doubling rent review clause, we have been working with Countryside to resolve the issue.
“As a consequence we have completed the sale of the freehold on your property back to Countryside.
“We are sorry for any concerns that your leasehold may have caused you and the time it has taken for us to put in place the mechanism for resolution.”
Nearly 4% – 1,961 properties – of E&J’s leasehold portfolio contains a clause which allows ground rents to double every ten years; the company says it has “been working hard to change all of these leases such that the ground rents will rise by no more than inflation”, but warns that it’s “a complex process”. It sounds as though just ten-year clauses are being looked at for now; anything with a 15-year (or longer term) doubling clause has not had a letter.
Here’s the full statement from E&J:
“In June 2016 we launched a review of lease terms across our entire portfolio and found 1,961 leases, representing about 3.9% of the portfolio, had been drafted by developers to contain a 10-year doubling of ground rent.
“Since then we have been working hard to change all of these leases such that the ground rents will rise by no more than inflation. This has been a complex process. In respect of the 519 leases where the lease income is under our control, we have agreed amendments with 423 leases such that ground rents will not go up by more than inflation. We have contacted every other leaseholder affected and hope to have completed the changes shortly.
“In respect of the leases that we administer but where lease income is contracted to third parties, we are in advanced negotiations with counterparties in order to change the lease terms such that ground rents will not go up by more than inflation and expect to reach a conclusion in the coming weeks. We will then be contacting affected leaseholders to seek their consent to make these changes.
“We would encourage any leaseholder who has concerns or questions to email us at email@example.com.
“In addition, since our review we have also amended our internal investment procedures and criteria to ensure no further leaseholds containing similar 10-year doubling of ground rents can be acquired or administered by E&J.
“Leaseholds have grown rapidly in the UK since the turn of the century as housebuilders have sought to meet the needs for housing. The leaseholder structure is highly effective where multiple dwellings share common services, such as in new build flats, and there is also clear legislation to protect leaseholders. But there are also examples of unnecessary leasehold structures, for example in new build houses which share only limited common services or none at all. There have also been examples where leases containing ground rents that double every 10 years have prevented the proper value or sale of an affected property. The Government and the media have played a key role in highlighting these issues and we are fully supportive of the Government’s recent consultation into certain leasehold practices.”
And here’s a statement on the matter from Countryside Properties: “Wherever possible, we sell properties on a freehold basis. Where we have to offer leasehold properties, we endeavour to make sure that they are affordable on both an initial and ongoing basis.
“Additionally, we have conducted a comprehensive review of properties we have sold on a leasehold basis and have concluded that the vast majority of these homes carry little or no financial risk to the occupier. However, for a small number of leases, we recognise that the 10 year doubling of ground rents increases too quickly and have taken action to address this issue.
“We welcome the Government consultation on leasehold reform and we will of course comply with all recommendations and legislation that comes from it going forward.”
- Government proposes a ‘radical’ ban on new-build leasehold sales
- Ground Rent Scandal: How a collective blindspot came into view
- ‘A Collective Blindspot’: On The Ground Rent Scandal
- Consultation documents: Tackling unfair practices in the leasehold market