‘We paid £101,000 for our Taylor Wimpey home in 2010 – now it’s valued at zero’

Can a newly built apartment from Taylor Wimpey effectively be worth nothing after just six years? Sean Greenwood’s wife paid £101,000 for a flat in a new development in Gornal, on the edge of Dudley, which she was told would be a great way to get on to the property ladder. But he claims that some banks and building societies are refusing to give mortgages to prospective buyers because a clause in the original leasehold agreement means owners are liable to pay ground rent to the freeholder that will spiral to £8,000 a year.

“We are now trapped with an apartment we cannot sell,” says Greenwood. “Our neighbour, hoping to move as well, told us that their intended buyer’s mortgage company had refused to lend on the property and deemed that it had a zero value. On further investigation we found out that the ground rent review clause in our lease is preventing lenders approving a mortgage.”

Ground rents are the crux of the problem. These are the annual payments leaseholders have to make to a freeholder which, in the past, were little more than a “peppercorn” rate, sometimes so low they were not even collected.

But as Guardian Money highlighted last week, developers have begun selling houses as leasehold that would traditionally have been freehold, with clauses that allow the ground rent to rise dramatically in later years. No services are given in return for the ground rent, which is distinct from management charges for looking after a building.

In the Greenwoods’ 125-year lease the £250 ground rent on the two-bed flat doubles every 10 years. In three years it will be £500 a year (on top of the current £840-a-year service charge), rising to £8,000 from 2059. Greenwood has made estimates that over the life of the lease (125 years) the freeholder will invoice the 32 apartments for a total of £21,672,000.

A letter sent to Taylor Wimpey last week by lawyers acting for another flat owner in the block says she “has now had two prospective buyers withdraw from the purchase in the last six months due to the excessive rent review clauses. The latest buyer’s mortgage valuation came in with a nil value due to the rent review clause”.

Like other flat owners, they want answers from Taylor Wimpey about what they are supposed to do. It sold the freehold to a private company two years after building the estate. The flat owners believe it was sold for around £138,000, and say they were not offered the option to buy. “The current freeholder stands to get their investment back 156 times over,” claims Greenwood.

A search of the main property websites reveals that flats are currently for sale in the block, and that sales have been completed in the last year, although at prices below the original purchase price six years ago.

In an open letter to MPs and the housing minister Greenwood asks: “How can a six-year-old apartment be worth nothing? And how can freeholders be allowed to fleece residents who are essentially held to ransom, not able to sell, so forced to live there forever and pay the spiralling ground rent charges?”

After last week’s story many readers asked why conveyancing solicitors appear to fail to warn buyers of the potential costs. Greenwood says his wife used a solicitor recommended by Taylor Wimpey to do her conveyancing and that while they “did make clear that she could not have a pet and had to be aware of the noise levels,” he claims that the topic of ground rent increases was not prominently raised with her. He claims that if any of the 32 buyers in the block had been made aware that they could be liable for a portion of, by his calculations, a £21m ground rent bill in the future they would have walked away immediately.

We put Greenwood’s story to Taylor Wimpey. It said: “We can’t comment on this particular situation as we do not know the details of how the valuation was arrived at. However, it should be noted that Taylor Wimpey does not own the freehold for this development.”

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