A group of home owners who believe they were “mis-sold” their properties are preparing to sue the builders and the solicitors they used when they bought their homes.
The home owners, who formed a Facebook group called the National Leasehold Campaign when they discovered that they faced huge increases in ground rent, say they were lied to by builders’ sales staff and badly advised by solicitors when they bought their newbuild homes.
Thousands of people have demanded answers from the bosses of builders such as Taylor Wimpey, Bovis, Persimmon, Bellway and Redrow about why they were told their homes were “virtually freehold” when their leasehold homes had onerous ground rent terms written into the leases, which were later secretly sold to investors.
Telegraph Money has previously highlighted the plight of home owners whose leases include provisions that can mean ground rents double every decade. The only way owners can avoid the ground rent increases is to buy the freehold – which can involve very large sums.
Ian Thomson’s case is typical. He bought a Taylor Wimpey house in 2011 and was told by sales staff that he could buy the freehold for £5,000 within five years. Ground rent on the property started at £295 and will double every 10 years for 50 years, eventually reaching £9,440 a year, but Mr Thomson’s solicitor failed to draw his attention to the clause.
In 2014 Taylor Wimpey sold the freehold of his home to a firm called Adriatic, which is now asking £44,000 for the freehold. “This is a sum we can’t afford,” said Mr Thomson. “Taylor Wimpey told us it was the salesperson’s fault and that she had left, so it wasn’t their problem.”
Taylor Wimpey stopped selling leasehold houses in January and is currently reviewing leases with doubling ground rents (but not those with rises linked to inflation). The results of the review are due next month.
The company refused to explain why customers were routinely told that they could buy their freehold at a later date when it was actually the company’s strategy to sell the freeholds to investment companies.
Justin Madders, a Labour MP, said developers should take the lion’s share of the blame for the situation home owners found themselves in. “They have pursued a business strategy that was far from transparent and has left countless people in a less secure position than they thought they would be in,” he said. “I think government-backed initiatives such as Help To Buy should now make it a condition of purchase that the property is freehold.”
Mr Madders is a member of a parliamentary group on leasehold reform, which is calling for all builders to stop selling houses as leasehold, as opposed to freehold, where there is no justification for doing so.
Sebastian O’Kelly, who runs the Leasehold Knowledge Partnership website, agreed. “With onerous doubling ground rent terms and similar, which trash the value of these properties, taxpayers are unlikely to get the loans repaid in full,” he said. “Mortgage lenders should never have lent against these assets either. And their loans are at risk.”
Lenders typically use the same conveyancer as the buyer during a house purchase, and rely on him or her to point out terms in the lease that might affect the property’s value in future.
Controversially, many of the solicitors involved were recommended by the builders, with some purchasers claiming that they were forced to use certain firms. Legal experts say this would amount to a conflict of interest and go against the Consumer Code for Home Builders, which says they “must not restrict the homebuyer’s choice of legal representative”.
Telegraph Money has seen a reservation document for a Taylor Wimpey home where the buyer was given £4,000 towards legal costs with “Nom sol only” (nominated solicitor) clearly written in the terms of sale.
Taylor Wimpey said: “Like most major developers, we have a panel of solicitor firms that we generally make available to customers to use for their purchase if they wish. All solicitors on this panel are completely independent of Taylor Wimpey and there is no obligation to use them.”
Mari Knowles, a partner at Leasehold Law, suggested that affected home owners get their legal file reviewed by a specialist and then consider legal action against the conveyancer. She has spoken to groups of leaseholders on affected estates to explain their options and reviewed a number of case files.
“If I find that there was a conflict [of interest], I will be taking robust action,” she said. “If there is a good case against the conveyancing solicitor, it may be possible to get that solicitor to pay some or all of the costs of buying the freehold. You can usually bring a claim only within six years from the date of completion, so it is imperative to get the file looked at as soon as possible.”
Some home owners may be considering simply withholding ground rent payments to the investment companies that now own the land on which their homes stand.
But freeholders have rights and their ultimate weapon is the threat of forfeiture: the return of the entire asset to the freeholder with zero compensation to the “owner”. Around 65 leasehold properties are forfeited a year.
“A national ground rent strike is a very real possibility here,” said Mr O’Kelly. “Can the Government stand by and let hundreds of homes be forfeited? It would be an utter outrage.”
‘It will cost us £40,000 to buy the freehold’
Joanne Darbyshire, 46, and her husband, Mark, 47, bought a five-bedroom house in Bolton from Taylor Wimpey in 2010. The couple, who have two children aged 16 and eight, weren’t offered the option of buying the freehold when they purchased the property but understood that it could be bought for about £5,000‑£6,000 at any point in the future.
The Darbyshires used a firm of solicitors recommended by Taylor Wimpey but the conveyancer failed to alert them to the onerous ground rent clauses in the property’s lease or the risk of the freehold being sold on. Both will have an impact on the property’s future value.
The ground rent on the house began at £295 a year and is due to double every 10 years. This means that in 50 years’ time the ground rent will be £9,440 a year.
“In 2012 Taylor Wimpey sold our lease to a company called Adriatic Land 2 (GR2) – something we were unaware had any implications until the sale of a neighbour’s house fell through last year,” Mrs Darbyshire said.
“Adriatic bought the freeholds on 24 of the 45 houses on our estate for £177,000, or £7,375 per property. We were not offered the chance to buy the freehold when the leases were sold; if we had been informed what would happen next we would have bought it.
“Adriatic now wants more than £40,000 in return for the freehold. This is completely unaffordable for us and many others. It also wants disproportionate amounts of money to do anything – from requesting a quote to buy the freehold (more than £100) to making any alterations. A neighbour has been told that there will be a £2,500 fee for permission to build a small extension.”
Together with her neighbours, she is calling for financial redress from Taylor Wimpey that would put her in the same position as if she had purchased a freehold home. She is also considering a professional negligence case against the solicitors.
Attempts to contact Adriatic for comment were unsuccessful.