Taylor Wimpey lease – cost of escape?

Taylor Wimpey lease – cost of escape?

11:46 AM, 10th August 2015, About 9 years ago 20

Text Size

Recently bought Taylor Wimpey 2 bed apartment. Built in 2007 on 150 year lease. Poorly advised by solicitor. Ground rent doubles every 10 years until 2057. Presently £250, 2017 £500, 2027 £1000, 2037 £2000, 2047 £4000, £2057 £8000. doubling

I planned to keep the properly long term eventually gifting to grandchildren. Anyone any idea how much it will cost me if I have to go all the way to a LVT for a 90 year lease extension and a peppercorn rent?

I know it won’t be cheap and I doubt the freeholder will be co-operative so I may have to go all the way to a LVT. I have read that lay people also sit on the tribunal board – do you think I may get any sympathy having been caught out by very greedy ground rent provisions?

Many thanks

Dennis


Share This Article


Comments

Dennis Silverman

6:08 AM, 15th August 2015, About 9 years ago

Reply to the comment left by "Chris Amis" at "14/08/2015 - 21:34":

You need at least 50% of the leaseholders wanting to enfranchise,i.e. buy the freefhold. At around £30k cost per flat i would very lucky to find even 4 or 5 willing to stump up or borrow that kind of sum.
I had thought about waiting for the law to change but the real problem will only occur in about 20 years times when these ground rents will be £2000+. I don't expect any real political pressure until then, and it will still rely on the government of the day being persistent in pushing through new legislation, with much opposition from pension funds and the like that originally bought these freeholds.
In 20 years time, if I am still here, I will be aged 91. I can cope with the hassle now but not then. In 20 years time if no legislation has happenned then the cost of a lease extension starting from a base ground rent figure of £2000 p.a. will be absolutely astronomic.

BigMc

9:57 AM, 16th August 2015, About 9 years ago

Hi again Dennis,
If, as it sounds, you are serious about this you need to get professional help in order that you can start to properly evaluate your options. As a first stage you have to know the likely cost of buying the freehold. There are many companies who will calculate this for you for very little cost. Also it is not necessary for at least 50% of the leaseholders to stomp up money only for at least 50% to be in favour of the purchase which is a very different thing. So I can see 4 simple steps to address your situation:-
1) Do I have the will to make the freehold purchase
2) Get a professional valuation
3) Plan strategy to persuade 50% to support the initiative
4) Decide on freehold vehicle; you will probably be best to set up a company to hold the freehold comprising all those who buy a share.
5) Determine funding source. You may find a number of leaseholders will buy multiple shares. Remember your new "company" will receive the ground rent income from the remaining leaseholders.

It is all doable and I have completed the purchase on a number of our properties as I'm sure many on this site have but it does involve hard work and determination.

Good Luck, Mike

Dennis Silverman

18:31 PM, 16th August 2015, About 9 years ago

Thanks for you advice, I do agree that the cost of buying the freehold will only cost slightly more than a lease extension. However if I go for the lease extension i will end up with a 240 year lease with 230+ years to run at nil ground rent. There are actually 46 apartments in the block and I don't want to be the sole freeholder collecting ground rents fron the others. I have had good advice from two experienced valuers. One advises me to approach the freeholder straight away to see if I can do a deal. I have written direct to the freeholder and am waiting for a reply. I am hoping I might get a positive reply. The freeholder is one of the 300+ companies owned by the Tchenguiz Family Trust. In February 2015 Vincent Tchenguiz missed a deadline to repay £430 millions of debt to Prudential, Bank of America and others. A few thousand from me now rather than in 18 months time may be helpful. Google Tchenguiz for lots of interesting threads.

Eddie Fraser

12:51 PM, 24th December 2016, About 7 years ago

Hi all - I hope you don't mind me resurrecting this topic as the subject seems to be becoming more popular due to recent reports in the press (mainly the Guardian and BBC R4).

Like the OP from 2015 I own a Taylor Wimpy Apartment which was bought as an investment (it is currently rented out) and I have the same 'onerous' ground rent doubling clause in the lease. This was not flagged as issue by my solicitor when I bought it in 2011. A familiar story, so it seems, and it was only the recent press coverage which prompted me to examine my lease in detail.

This is causing me to think again about my original plan to hold on to this investment long term.

If the OP is still on the forums, do you mind me asking what you decided to do in the end?

Rgds.

H

18:50 PM, 26th December 2016, About 7 years ago

Hi Eddie
I also bought my flat in 2011 as well starting at £250 and doubling every 10 years . I have just only recently started looking at my options again having also read the Guardian articles. I am currently looking into lodging a professional negligence claim regarding the onerous ground rent clause. I have not investigated further how much it would be to extend the lease but I think it would be too expensive.
Do you mind me asking what development you invested in ? And have you looked into how much it would be to extend the lease using the Statutory procedure.

H B

16:47 PM, 28th December 2016, About 7 years ago

The ground rent for the last 10 years of the lease will be £4,096,000 p/a.

The entire ground rent receivable unset the life of the lease is £81,917,500.

This may impact the property's value in the future.

Eddie Fraser

17:10 PM, 28th December 2016, About 7 years ago

Hamish - thanks for your response. It's early days having only just found out I was one of the TW buyers who had this unfortunate clause in my lease. Very much in fact finding mode at the moment with no decisions or actions having been made/done. I don't feel comfortable talking specifics, such as the actual development, at this stage but I am happy to keep the forum informed if I find any more useful information about this whole issue.

HB - I can only speak for myself (but many of the previous posts do to say this too), the lease in question does double the GR (from £250) every 10 years, BUT only for the first 5 of the 10 year anniversaries. So once it reaches £8K per year (in my case in 2060) it stays fixed at that amount. This is very similar to the details written by the original creator of this topic. The fact that even this, admittedly less extreme, version of the lease clause originally created by TW may well impact on future value is exactly what we are talking through possible solutions for.

H B

21:49 PM, 28th December 2016, About 7 years ago

Reply to the comment left by "Eddie Fraser" at "28/12/2016 - 17:10":

Ah. Thank you for pointing this out. I had misunderstood this point.

It is still a lot of money as that £8000 will presumably be for the remainder of the lease - so £800,000.

One option might be too sell up and hope that the buyer does not notice.

I also think that the solicitor has some kind of liability for this. Some have already started action against their solicitors:

https://www.theguardian.com/money/2016/nov/19/new-build-ground-rent-scandal-legal-battles-solicitors-negligence

Eddie Fraser

9:51 AM, 26th January 2017, About 7 years ago

Just to keep this topic alive....

As one of 2 or 3 people in this topic who actually own a TW recent build, investment, property who have (after being alerted by the press) discovered that the ground rent doubles every 10 years for the first 5 of the 10 year anniversaries -- and who were not warned off by their (often TW recommended) solicitors of this "hidden" clause (see my previous comments, the OP's comments and Hamish's comments for full details), I can see the following options:

(please note these are just my own personal views)

1) Keep the property as planned long term and hope for a change in the law which will effectively cap onerous ground rents. I gather the the Govt. is meeting again soon to talk options according to this recent telegraph article.

http://www.telegraph.co.uk/money/consumer-affairs/new-build-property-trap-could-stop-selling-home/

The risk here is nothing will actually happen to benefit the people who have these leases now. Unravelling this could take a long time.

Looking at my lease in detail, around the doubling clause , there is also another clause stating that upon a change in legislation the lease allows it's owner to take ground rent up to £1 less than maximum allowed by any new law. So a new cap on max. ground rent allowed could be the best outcome.

2) Sell the property now or soon (e.g. when the current tenancy expires - assuming it is rented out), in the hope that whilst the ground rent is still in the hundreds, not thousands, for at least another 10 or 15 years, it will mean it is still a sellable property..... but be prepared to take a hit on the asking price. The new owners may benefit from a change in the law later on down the line as well as potentially buying the property for a discounted price.

The risk here is the property may not sell at all or will only receive very low offers and this may result in an extended period of lost rent - assuming trying to sell without a tenant in-situ.

3) Go after our conveyancing solicitors for professional negligence as they didn't highlight the issue to us at the time of buying.

Here there is, of course a risk of not winning any claim. This is also a bit of a grey area - I have not seen any details on cases brought against solicitors, the amounts awarded and so on. Also I gather there is a time limit of 6 years after which this cannot be pursued and also, to date, no actual financial loss has taken place.

4) Attempt to extend the lease (statutory after 2 years of ownership) thus reducing the ground rent to peppercorn.

Again, this has risks. For one thing, most of these companies will charge you >£100 for the initial enquiry. Also evidence seems to show they will ask for an very large amount taking into consideration the potential value, to them, of the lease they were sold from TW.

5) Finally one other option which occurred to me is that as TW seem (in communications made public so far) to say that these leases are actually not a problem and were, at the time, a well thought out standard lease, I wonder what they would say if you attempted to part exchange the property on a another TW new-build - as they no longer have these leases anymore. This would only work if you looking at investing in a larger or more valuable property anyway, but surely they couldn't refuse because of a lease they actually designed? Or could they?

So to summarise the way I see things, there are no simple answers. Whatever route taken has risks. I'd really like to see some real cases of people in the same situation and what they did.

Thanks everyone for your time reading this...

Dennis Forrest

18:19 PM, 24th July 2017, About 7 years ago

Reply to the comment left by "Eddie Fraser" at "26/01/2017 - 09:51":

I am the original poster on this thread about 2 years ago. I have recently served a Section 42 notice on the Landlord for a Statutory 90 year lease extension and a peppercorn rate. Although I have instructed a solicitor I have not appointed a valuer and will be doing my own valuations and negotiations. Because very few transactions will have been completed - mine still has 140 years to run - I will be comparing the premium asked by the the valuer with similar premiums asked on the Allsop website which auctions leases. I will be arguing that leases that double every 10 years are poor investments for two reasons -
1. Risk of default by the tenant paying ground rent on unaffordability grounds.
2. Political risk that a future government might soften the terms of lease to just doubling every 20 years or changing the terms to index linked.
I will be arguing that an investor would be better of financially buying say 4 leases which double every 25 years than just one like mine which doubles every 10 years.
I will be arguing that this theoretically astute investor will want a much higher yield on his investment to justify the increased risk. A higher yield means a lower purchase price which in turn for me is hopefully a lower premium. I will take this to First Tier Tribunal if landlord's valuer is uncooperative. I know the procedure and have already sat in on one tribunal hearing.
I am also pursuing a negligence claim against the solicitor through whom I bought the property through. The solicitor admits that nowadays he always points out very adverse lease conditions.

Leave Comments

In order to post comments you will need to Sign In or Sign Up for a FREE Membership

or

Don't have an account? Sign Up

Landlord Tax Planning Book Now