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In a time of universal deceit – telling the truth is a revolutionary act

Parallels in the movement to abolish slavery and the leasehold system today

fullsizeoutput_78dThere are far more similarities between the slave trade and the leasehold system in England and Wales than you would ever imagine. The leasehold system is a form of financial servitude where the leaseholder is forever compensating the freeholder for living on ‘their land’. Just like slavery, the leaseholders find themselves snared in this system without ever giving their consent.

Wait, you may say, the leaseholders signed the lease! Surely that is consent to them being bound by the rules of the leasehold system? Not true, leases are purposefully drafted by freeholders and their oily solicitors to obfuscate the true nature of the terms. Generally, the punitive fees demanded for licences and permissions hidden in the lease vaguely promise to be ‘reasonable’ but are usually far from that.

The real truth though is no leaseholder has ever granted their consent to be part of the actual leasehold system itself, no leaseholder wants that, they want a share of the building and land it sits on when they purchase their property. Commonhold exists and should be compulsory like it is in the rest of the world except all flats and many houses in this country are created as leasehold with no consultation with the future purchasers.

Freeholders regularly trot out the moronic excuse ‘if you don’t like leasehold, don’t buy a leasehold property, simples!’ But with 5 million leasehold properties accounting for nearly 20% of the total housing stock in a market suffering severe housing shortages, blaming a leaseholder for buying a property of this type is like blaming a starving person for eating contaminated food, they have no choice!

There is little profit to be had from arguing this point further, only freeholders and those who make their money representing them bother to deny this is true and their voices are valueless in this debate. Leasehold is an unfair, unjust system which immorally benefits a few at the expense of the many, just like slavery did. Undeniably immoral but inexplicably not illegal at all!

The slave trade in Britain in the 18th century

In the 18th century the slave trade in Britain had become one of the main sources of wealth for the British Empire and had grown into the ‘dot com’ lucrative financial bubble of its time.

It wasn’t just the slave traders that rode into villages and forced millions into a

curtailed life of servitude who profited from this trade, there were fortunes to be made by helping to finance the transportation of slaves too or even just buying a couple of slaves as a pension for old age. The slave trade was respected and so ingrained in many aspects of daily life that ending that trade seemed impossible.

In the 18th century alone British vessels were involved in the shipping of between 4-5 million slaves.

The support for the trade came from the very top of British society. Queen Elizabeth I bankrolled one of the first ever slaving expeditions, in fact the royal family and the wider aristocracy’s financial support was central to the development of the lucrative slave trade.

For example, ‘The Royal Adventures in Africa’ company had financial backing from King Charles II and his wife the Queen, seven Knights of the Realm, four barons, and a Marquis.

The Bank of England also backed the slave trade. Richard Neave was the director of the bank and was also the director of the ‘Society of West India’ merchants and his son went on to run both companies simultaneously too. It was the backing of the financial sector that really allowed the slave trade to become so established.

The slave trade also created the very first British millionaire, William Beckford, who owned more than 22,000 acres of land in Jamaica. He along with his brothers used their wealth to become MPs and subvert both political direction and public opinion in favour of the slave trade.

In fact by 1766 there were at least 40 MPs who were either planters or they made their money from the slave trade in some way or another. The abolition of slavery seemed like an impossibility, everyone was making too much money from it to ever allow it to change.

Then along came a remarkable man who decided to make it his life’s goal to do just that, bring to an end the slave trade.

The man who made slavery illegal.

Thomas Clarkson was born 1760. He was the son of a reverend and grew to be a good six inches taller than the average Britain of the time. He was bright, enjoying his education but he was seemingly destined for an unremarkable life as a priest in a sleepy country parish somewhere.

However, he entered a competition where he had to submit an essay written in Latin to win a prize. He won the prize but the contents of what he had written would change his life completely and eventually the world.

The topic of the essay was ‘Anne liceat invitos in servitutem dare?’ (‘Is it lawful to enslave the unconsenting?’)

fullsizeoutput_748Thomas was so deeply affected by the research he had done for his essay that he became consumed with wanting to find out all he could about the slave trade, he read everything he could about it and when that was not enough he went out to speak with anyone he could find who had first hand knowledge about it.

He said of that time that: “A thought came into my mind… that if the contents of the essay were true, it was time some person should see these calamities to their end.”

Thomas became that person, a man possessed. He started to scour the country looking for like-minded people he could talk with. It was said he would often ride 16 hours a day and he travelled at least 35,000 miles on horseback before he saw his dream realised.

It became the norm that people would threaten to kill him and on a stormy night in Liverpool a group of slave ship owners tried to throw him into a torrid sea.

To get his message out even further he translated his essay into English and distributed it across the country, as well as igniting sentiment it also acted as an introduction to other anti-slavers and soon a body of resistance had formed. This angered those at the very head of the establishment as well as those who made their fat living from slaves.

However loudly Thomas’s voice would decry the inhumanity of slavery the establishment would shout as loudly back declaring slaves were simply being saved from a life of savagery and were being given a chance to become ‘good’ Christians. They argued that contrary to what Clarkson asserted, slaves were generally treated well by their masters except of course for the odd ‘bad apple’.

Thomas knew he would have to raise his game considerably if he were to drown out the white noise of the establishment’s pro-slavery PR campaign.

He started to display the tools of the slave trade which were openly on sale in most port towns. He had handcuffs, leg shackles, thumb screws and surgical instruments with a screw device called a ‘speculum oris’ which were used to pry open the mouth of any slaves refusing to eat, who figured being dead was better than the life awaiting them, so they could force feed them and the slave owner would not lose their investment.

He also displayed fine art work and crafts produced by the slaves to show they were in no way ‘savages’ and no different from any other human being.

People power and politics

He also knew he would need political support if his campaign stood any chance of success. He first met William Wilberforce, the man who would eventually get all the credit for the abolition of slavery, in 1787. After a long and animated discussion between the two men Wilberforce agreed to raise the issue in Parliament for the first time.

Clarkson’s campaign started to gather pace quickly and by 1788, 103 petitions for the abolition of slavery had been signed by around 80,000 people and presented to Parliament and Wilberforce did manage to raise the issue of the slave trade in the House of Commons.

Although the abolition movement had gained considerable public support it was the political influence of the slavers in Government that was hard to shake. Lobby groups went into Parliament to argue their side of the debate. They cranked up their PR campaign another notch, even claiming that the time slaves spent on the slave transportation ships being ‘carried to their new adventure’ were the “happiest part of the Negros life”.

The efforts of these slavers in Parliament turned the abolition battle into a war of attrition with many debates on the subject in the house becoming nothing more than hot-air.

Clarkson realised that continuing to call for the abolition of slavery as an all-or-nothing event was futile, there were too many vested interests standing in the way.

He needed something that would sway public opinion so firmly in his favour that it would sweep away the political opposition and he came up with an idea that was pure genius.

A picture paints a thousand words

fullsizeoutput_745He decided to commission a true life accurately scaled drawing of the conditions slaves were actually transported in. He used the exact measurements from an actual ship which carried anywhere from 697 to 740 slaves. The picture painted a truly dire picture of the conditions the slaves were transported in, it shocked the nation and the effect of that picture was like a bomb going off.

Once printed, it began to appear in pamphlets, newspaper articles, magazines and books. Also 7000 copies were produced which were hung on the walls of homes and pubs throughout the country.

This picture was one of the most important instruments used to turn public opinion against the slave trade once and for all and would create a swell of public anger that would sweep away the political posturing.

The picture was important for two reasons, firstly it made ludicrous the slavers claims that being transported in this manner could be the best days of anyone’s life. More importantly though, it humanised slaves as people just like us. It forced people to see slaves as fellow human beings who had the same feelings and dreams that we did and were not just revenue generating units for the rich to grow richer by exploiting them.

It proved decisive.

The end of slavery and the biggest compensation pay-off in history

An unavoidable momentum gathered pace and as we know the slave trade was eventually abolished in 1833. The story doesn’t end there though.

The Government was forced to compensate all the slave traders and owners and it became the biggest compensation pay-out ever made and still, to this day the total amount paid out has never been beaten.

The British government’s paid out a total of 20 million pounds to compensate some 3000 families for the loss of their ‘property’ the slaves. This equates to about 18 billion pounds in today’s value.

The list of those who received compensation was far reaching and showed how this trade had become part of the fabric of life. There were also many notable names too like the families of David Cameron, Douglas Hogg, Graham Greene, George Orwell and the Earl of Harewood who all received considerable compensation when slavery was abolished. John Gladstone the father of the 19th century prime minister William Gladstone received compensation of £106,769 which is worth around 83 million pounds today for 2508 slaves he ‘owned’.

Not one slave though ever received a single penny compensation from the Government to compensate them for what they went through.

Let’s look at the leasehold system today and look at the many similarities.

The history of freeholders in 200 words

The very first freeholder was the Crown. William the conqueror took all the land in country by force which the Crown still, technically, owns and have managed to cling onto for nearly 1,000 years. Some of this land was then dished out in a feudal stylee to aristocracy and nobility in exchange for funds and military support and they too still own huge swathes of the country as well as many of the most lucrative freeholds.

The industrial revolution and a steep rise in the population happened as the aristocracy declined so the new freeholders were wealthy individuals who hoovered up ground rents as fast as they came to market. Many of them were either already involved in politics or quickly became involved. Others simply funded political parties who promised to represent their interests by maintaining the leasehold system and blocking any attempts to alter legislation.

The financial world has always supported the freeholders with banks, Insurance companies and pension funds woven into the history of leasehold. Of course there are also thousands of ‘accidental’ freeholders who also can be vicious and amoral who see their leaseholders simply as a way to get rich on the back of their suffering.

The campaign against the unjust leasehold system

In the building of Britain leasehold became a vehicle to make staggering wealth for the freeholders, especially when there were no legal rights to ever enfranchise (the meaning of which comes from the old French enfranchiss “to set or make free”).

A freeholder would sell a lease on a piece of land for 99 years (called a building lease) and the builder would build a property to the freeholder’s specification and sell it. Once the lease had run its course the freeholder would then take possession of ‘their’ house (or flat) which they had never paid a penny toward and could sell it on again and again thanks to leasehold creating a perpetual land ownership device for the rich.

That is how many of the grandiose squares in London came to be built and are still owned by the ‘great’ estates who are the freeholders. This method of wealth generation was not limited to prime central London though.

This was also a standard method employed in Wales and Cornwall for miners and farmers. A miner would lease a bit of land and build a home for their family and live it in for generations until one day the freeholder would write to them explaining that the lease had fallen to zero and they now owned the miners house and could they please leave or pay the freeholder a fortune to stay.

In the late 19th century this prompted a huge outcry against these greedy freeholders with newspapers constantly writing articles in support of the leaseholders and emotive debates in the House of Commons. There were marches and demonstrations and the rise of a new term ‘anti-landlordism’ a derogatory term to describe unscrupulous freeholders.

Over the next 160 years there have been countless efforts to end the leasehold system by various groups with varying degrees of support but all of them have been unsuccessful…. up to now.

Why is that?

For the very same reasons the movement to abolish slavery found it so difficult to change a blatantly immoral and brutal system, the movement to abolish leasehold has hit the same brick wall. The people who own the freeholds are often the very elite of society with huge political influence. They are backed by powerful banks and pension funds who make a fortune from the system or they are freeholders who fund political parties to look favourably on their cause, to keep making money from leasehold.

Everyone is making too much money so why change it? A few million people are trapped in this nightmare form of land tenure but, big deal right?

Also the Government knows that to make any retrospective changes to the leasehold laws would trigger a compensation payment to the freeholders that would make the slavery compensation amount look like small change.

Are the leasehold houses the ‘Clarkson picture’ moment?

There is now a huge new movement against the leasehold houses scandal which has gained so much traction it is reaching a critical mass. There have been numerous political statements, inclusions in the Queen’s speech promising to wipe out leasehold abuse (the irony of which should not be overlooked) and it is spoken about daily in the press and media.

The leasehold house scandal has become vitally important in the battle to end leasehold. Just like Clarkson’s drawing of the conditions of the slave transportation, the leasehold house scandal has humanised leaseholders and brought to the public’s mind just how bad the abuses of the leasehold system can be.

Even though many have tried for years to bring focus to the constant abuses suffered by leasehold flat owners, it has always brought a shrug of the shoulders and a swift “Well, flats have to be leasehold don’t they?”

With houses though, it is easy for everyone to understand that there is no need to build houses as leasehold.  Add to this the fact developers and freeholders included onerous ground rents and lease clauses simply to make more money, then this has proved to be a step too far in the public opinion.

It is therefore essential that the owners of those leasehold houses as well as every other leaseholder in England and Wales should get behind this campaign and support the abolition of leasehold houses. This is the first positive step in ending leasehold and once the sale of them has been banned the focus will shift to leasehold flats.

People will see that there is no reason that flats should be leasehold either but are made so solely to create an asset class for wealthy people to get wealthier.

An important note

I want to make it clear that in no way whatsoever am I comparing current day leaseholders and their experiences to the actual slaves and the brutal and criminal way that they were treated by the elite of this country.

My comparison here is made purely on the history of the abolition of slavery, the process they went through and the challenges that campaign faced.

There is then an obvious comparison and lessons we can learn which we can apply to the campaign to end leasehold.

We look back at the history of the slave trade with repulsion and disgust and it is hard to comprehend that at one point in our collective history this vile trade seemed a legitimate way of making money.

One day I hope people also look back at this unjust leasehold system and wonder how we all allowed it last for nearly 1,000 years.

Anne liceat invitos in servitutem dare?

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The dangers of buying the freehold of your house directly from your freeholder

Introduction

fullsizeoutput_664Thousands of people who bought new build houses have now realised that, through no fault of their own, they have bought a leasehold house with bad ground rent terms. In addition there are costly lease terms that mean they have to pay the freeholders fees for permission to alter their homes, change carpets, carry out DIY and even to sell their own properties.

This has lead many to the conclusion that the only option is to buy the freehold of their own home but are confused about how to go about it and what is involved. This confusion adds considerably to an already stressful situation, so I would like to offer some clear advice on the best option you have to get out of this unjust situation.

There are two different ways to buy the freehold of your home

You have a legal right to buy your freehold under the 1967 Leasehold Reform Act. Here there is a legal process to follow with a statutory valuation method set down by law. If the freeholder will not agree to negotiate fairly you have a legal right to force them to and you are offered legal protection on the terms of the freehold purchase.

To many people this process may seem daunting and uncertain and understandably people shy away from it.

The other option is to contact your freeholder directly and ask them how much they want from you to buy the freehold and see what figure they come back with, this is called an ‘informal’ deal.

The purpose of this article

I have now been contacted by hundreds of people who are asking my advice on whether the best option they can take to buy the freehold of their house is to negotiate the cost of doing so directly with their freeholder.

I have already written a very comprehensive article entitled ‘The leasehold houses scandal and what you can do about it’, but because of the number of calls I have had, I’ve decided to produce this document to help you make the best and most informed decision.

This article will set out why the informal deal with your freeholder is often the worse deal you could possibly make.

You have no legal protection

First and foremost I would like to state it is very important to know that, if you negotiate directly with your freeholder, you are actually stepping outside of any legal protection you have under the Act of parliament that was brought in for you to buy the freehold, the Leasehold Reform Act 1967.fullsizeoutput_47b

The Act was designed to offer leaseholders legal protection when you go through this process and legal ways you can force your freeholder to negotiate fairly with you during the purchase of your freehold.

An ‘informal’ freehold purchase, however, means you step outside of this protection and will be dealing with your multi-millionaire professional freeholder directly. They bought your freehold to make as much profit from you as they can, and you can only hope that they will act fairly with you.

Therefore the details of the offer you will receive from your freeholder will be a ‘take it or leave it’ deal and if you are unhappy with the price quoted or the terms of the acquisition they are proposing you have no way of forcing them to change the terms offered. Your only option will be to walk away from the deal.

Your freeholder will not want to sell you the freehold of your home at all, they bought it as a long-term investment in the hope they would be raking in profit from you for many years to come. This means they will be asking for a huge amount of money and will also look to retain terms in the purchase that they can still make money from in the future.

I cannot stress enough that you should be highly suspicious of these offers and act with  extreme caution.

How do they work out how much you should pay?

When your freeholder quotes you a figure to buy your freehold informally they are literally stating the largest amount they can extract from you.

The figure quoted is not based on the statutory valuation method in any way ,shape or form it is just a huge figure plucked out of the air, a figure they will often charge you to produce.

I see freeholders regularly asking for 30, 40 or even 50 times your current ground rent as  the figure quoted and this is outrageous and can be double or sometimes triple what the statutory valuation method would be!

Your only option to try to reduce the bloated figure your freeholder has proposed is to write back to them and ask them nicely if they would lower it. They will sometimes knock another few grand off the price but as they don’t want to sell it and they don’t need the money why would they offer you a fair price?

I have now seen many people buy their freeholds informally and pay £25,000 more than they should have done just to avoid going down the statutory route!

Beware of some other tricks your freeholder could pull 

I have now seen many, many cases where people have bought the freehold of their homes, but the freeholder has managed to retain clauses where the fees for licences and permissions due to them are kept in the terms of the informal deal!

You have bought your freehold for an eye watering amount of money but you still may have to pay for permission to live in your own home.

Some of the clauses I have seen retained are leaseholders still having to pay £300 permission per room to change the carpet.

Several thousand pounds to pay for permission do any DIY on their own property, four and half thousand pounds for the permission to build a conservatory in their own back garden and £107 for permission to put up a blind above a kitchen window.

Many hundreds of pounds for permission to rent out your own property or the same amount when you want to sell your home.

It is this wildly unjust leasehold system that allows this travesty to be even possible but predatory freeholders will take full advantage of it.

The offer to turn a doubling ground rent to one linked to Retail Price Index (RPI)

The other thing I have seen freeholders offer is to change a ground rent that doubles every ten years to one that is linked instead to RPI.  This is done under the pretence of them deciding to act fairly and change your bad situation to one more favourable to you.

On the surface this offer may seem like a God-send but with all things leasehold, the devil is in the detail.

If you have a doubling ground rent you will be very keen to explore this with your freeholder but the deals I have seen offered of this type are not good at all and should be looked at with extreme suspicion.

One of the very concerning things is that the freeholder wants your ground rent to double first BEFORE it is linked to RPI, which means most ground rents would now be £590 per year linked to RPI for the remainder of the lease.

fullsizeoutput_4c7This in turn means that, if you accept this deal, your house now has an onerous ground rent that will stay linked to RPI and be an onerous one for evermore. The onerous ground rent might still give you problems when you try to sell your home.  Nationwide Building Society is the first mortgage provider to announce that it won’t lend on homes with onerous ground rents. Other major lenders are likely to follow.

On top of this freeholders are asking for between £12,000 – £15,000 for them to transmit doubling ground rents to one linked to RPI. This is outrageous!

Also in these deals the same terms of transferal will apply with the retention of licences and permissions which will be included in the terms of your new lease.

Additionally, if you wish to go on to buy the freehold of your house with a £590 a year ground rent linked to RPI then it will still cost you many thousands of pounds. You will either have to buy your freehold informally or via the statutory route.

You will find yourself  in exactly the same position you are currently in, except you will have paid your freeholder twice! Once to move from a doubling ground rent to one linked to RPI and again to buy the actual freehold of your home!

Freeholders are a pretty clever bunch aren’t they?

Conclusion

I agree that the legal process may be daunting and perhaps looks uncertain. This puts many people off going down this route. I fully understand why the informal option can appear to be easier and less fraught.

However, please be aware that if you go down this informal route you will pay much more than you should do for your freehold, perhaps £25,000 more! Your freeholder will retain clauses that continue to favour themselves and will keep generating money from you well into the future.

The very best option you have to get out of this leasehold scandal is to buy your freehold using the statutory legal process which is there to protect you. If you can do this at the same time as some of your neighbours you will have strength in numbers and it will cut down on the costs.

Good luck.

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Some questions raised by the Taylor Wimpey offer to spend £130m to rectify the leasehold house scandal

fullsizeoutput_653.jpegLast week Taylor Wimpey announced it has put £130m on one side to convert all the houses it sold with ground rents that doubled every ten years into ground rents that are linked instead to grow in line with the Retail Price Index (RPI).

Later that day Peter Redfern, the Chief Executive, took part in a ‘Q1 2017 Earnings Conference Call’ to explain Taylor Wimpey’s financial statement and its actions to rectify the leasehold houses scandal it created and answer any questions the participating financial analysts had.

On examination of these statements I have some serious questions that need to be addressed by Taylor Wimpey. On the one hand it could be said that Taylor Wimpey did not need to offer this and it is being decent because it ‘feels it’s the fair thing to do’ and I sincerely hope that is true.

However, having worked in the leasehold sector for the last 10 years, I have become very wary about deals that look ‘too good to be true’ and I am suspicious of this offer as I find many of the comments made by Taylor Wimpey ring serious alarm bells in my head.

Mr Redfern made this statement:

“What we’ve announced today is that we will do a Deed of Variation for those customers which requires a negotiation between us and the freeholder which we’re undertaking on the customers’ behalf.”

We must wonder why Taylor Wimpey took this action, although it is clearly the first step in the right direction, it is not what its clients asked it to do nor do they want it.

Not a single person I have spoken to wants to move from a doubling ground rent to a slightly less onerous ground rent linked to RPI with all the same leasehold clauses and unfair payments to the freeholder for pointless licences and permissions.

What the clients of Taylor Wimpey want is to be able to purchase the freehold of their homes and free themselves from the spider’s web of leasehold.fullsizeoutput_657.jpeg This is a legal right they have.

Mr Redfern went on to say:

“We’re not releasing a number and therefore, a cost for lease of the actual provision, it includes the costs of the process and we think it is calculated on a very prudent basis.”

So it refuses to release the number of leasehold houses affected in this, nor how much it will be paying the freeholders in compensation. This seems a very strange state of affairs and not one that will fill any leaseholders with confidence.

This is a secret deal being done between Taylor Wimpey and the freeholders, the details of which are hidden. Was it not this very same secret deal originally done between them both that meant the leaseholders found themselves trapped in this leasehold hell?

They say these terms were “calculated on a very prudent basis.” Prudent for whom? As we know, many freeholders were asking leaseholders for in excess of £40,000 to buy their freehold if the ground rent doubled every ten years. It seems Taylor Wimpey has found a way to force the freeholders to accept much more modest figures for this deed of variation, but it refuses to share this information. Why?

Without any doubt whatsoever, the freeholders would only readily agree to this unorthodox suggestion if there was something in it for them. What is that something? They don’t need the cash; they need the long-term investment that is your home.

Surely a better option was to use this ability to force the freeholders to accept a more reasonable figure and then facilitate the leaseholders affected to be able to buy their freeholds, as that is what they want?

So that raises the question who does this deal on the table really benefit, the freeholders or the leaseholders?

It would benefit freeholders is if the ground rent in these doubling terms were to double to the first increase as part of this deal. I have seen this on every deal of this type I have seen already, which means the ground rent would be £590 pa linked to RPI.

If this is part of the deal they are suggesting it means each and every house would now have an onerous ground rent on their property, forever! The freeholders will retain their profit as they collect this ground rent as well fees for licences and permissions.

Leaseholders who then plan to move straight on to buy their freeholds from the freeholder once this deed of variation had been carried out would find themselves back in the position they are now in that of trying to negotiate to buy it with an onerous ground rent clause and it will cost them many thousands of pounds to do it. They will have to pay the same two sets of legal fees and may have to go to the Tribunal to force the freeholders to negotiate fairly on the cost of doing all this.

The leaseholders may find themselves in only a slightly better position than they are in now whilst the freeholders would be very happy having been paid twice for their freehold and Taylor Wimpey would be blameless from a PR standpoint.

This raises another serious question, Mr Redfern continued:

“The customers themselves have legal rights and so there are other ways at arriving at a valuation. So we’re not sort of — just got 1 lever to pull with those freeholder conversations”.

fullsizeoutput_65d.jpegThe customers have all THE legal rights, whereas Taylor Wimpey have no legal rights whatsoever to negotiate this on behalf of the leaseholders. Therefore, these negotiations will be informal negotiations, which means all leaseholders will have to step outside the legal protection they have buying their freeholds under the statutory route.

An informal deal is a ‘take it or leave it’ deal as there is no legal mechanism to remove any clauses that seem onerous. For example, we have seen deals of this nature before where there is a clause inserted that states that the person signing this deal cannot proceed to buy their freehold for a certain period of time. If that were the case here, you have no legal mechanism to remove it.

The same would be true if the terms of the deed of variation states your ground rent will double firstly, you have no legal mechanism to remove it before you sign.

There could be other clauses included in this deal like a time restriction on when you can then proceed to buy your freehold, a clause that could indemnify the developer against any future litigation or even non-disclosure agreements.

I have no idea if these types of terms will be included in the deed of variation at all, I include the various scenarios I regularly see in these deals simply to illustrate just how vulnerable leaseholders are entering into this kind of informal deal outside of the legal protections of offered by statutory freehold purchases.

One thing is certain though. Part of the deal will not include the removal of the huge fees leaseholders will have to pay for the permissions and licences that are included in their current leases.

Another worrying thing here is that Taylor Wimpey is only offering this deed of variation to customers who bought their leasehold houses from them directly, whereas the people who bought these houses from the original purchaser are excluded from this deal.

That does not seem fair at all. These houses still have the same unfair ground rents and terms as those who bought directly from Taylor Wimpey. If a car make was recalled because it had a certain fault, the car manufacturer would recall all the cars not just those bought directly from the manufacturer.

Even more worrying about this unsolicited deal being offered is that it infers a tacit agreement by all those who take up this offer, that leasehold houses with ground rents linked to RPI as somewhat acceptable and would possibly mean any future litigation against them would not be possible.

It also means that when those who accept this deed of variation will have nothing to complain about nor any recourse against Taylor Wimpey when they try to but their freeholds at a later date.

If this deal is accepted, the freeholder could be left sitting pretty with their long term investments and a nice compensation pay off from Taylor Wimpey. Taylor Wimpey get to walk away from the whole thing with its head held high and any chances of future litigation receding.

As ever, it’s the leaseholders left in a position that is little better than the original position they were placed in by these onerous lease clauses which we written and put in place by the developer to earn extra profit.

Everyone wins except the leaseholders and this is the very story told over the last few hundred years in the history of the leasehold system in this country.

It would be tedious for me to pick through every single point in Taylor Wimpey’s statement. You all now know how this works and what you all went through. That said there are some other worrying noises that could indicate intent and what the developer is focusing on.

Mr Redfern said:

“We haven’t had a single legal claim, including on these doubling ground rent provisions. Because people did have independent legal advice.”

This ignores the fact that the ‘independent’ legal advice was obtained from named solicitors recommended by the developers themselves for reduced fees and a speeded up service. It also ignores that hefty discounts were offered for ‘quick sales’ by the developers.

It also ignores the fact that since this leasehold house scandal erupted, Taylor Wimpey has simply told everyone to sue their conveyancing solicitor, thus neatly deflecting their blame in all this.

Mr Redfern then said:

“The contract (the lease) is very clear….. this isn’t a case and we might feel differently about it if the lease terms were hidden, sort of split between 3 clauses and really difficult to understand. They’re not, they’re very straightforward.”

fullsizeoutput_658.jpegThese leases are as complex as we have ever seen and the vast majority of ground rent clauses are exactly split into three sections meaning for most people it is impossible to glance at what their ground rent is and when it increases. I have been sent hundreds of pleas from people asking me to try and identify just what their ground rent is and how much it increases.

He then says:

When we look at RPI leases and the sale of leases on houses historically, people knew they were buying a leasehold house.

Most did, but at point of sale they were told by Taylor Wimpey salespeople that they could buy the freehold of their homes for a few thousand after two years. This disarmed many of the purchasers who would otherwise been on full alert regarding the detail of the leasehold houses who mistakenly believed that the freehold would be theirs for a modest fee so why worry?

The freeholds were then sold to professional ground rent investors without Taylor Wimpey’s leaseholders being informed or consulted about it, nor offered a chance to purchase first. At that point the terms of the leasehold houses became important to everyone, but by then it was too late.

Does this professional spin put on the current leasehold house scandal and Taylor Wimpey’s role in it make us feel more confident or less confident in their role in this cloudy informal deed of variation being offered?

As I mentioned at the start of this examination we hope with every fibre of our being that this offer is genuine and will help those most affected by this scandal but would urge extreme caution before rushing into any informal deal made between Taylor Wimpey, the creators of your current situation and the professional freeholders who are currently benefitting from the deal done with your house builder.

Until I have the details of the deal being offered I cannot possibly advise fully on but experience has taught me to hope for the best and plan for the worst in all leasehold matters.

A much better deal would be for Taylor Wimpey to help you all to buy your freehold under the statutory process created to offer leaseholders protection under law. This for me is the only acceptable option and Taylor Wimpey should be asked why this is not an option on the table.

To join the National leasehold Campaign page click here and to check the latest news please follow the Leasehold Knowledge Partnership and support their tireless work.

The quotations were supplied by:

https://seekingalpha.com/article/4066408-taylor-wimpeys-twodf-ceo-peter-redfern-q1-2017-results-earnings-call-transcript

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The leasehold houses scandal and what you can do about it

Why are leasehold houses called a ‘scandal’?

imagesThere is no reason whatsoever why houses should be sold as leasehold, they should have been sold as freehold properties. Worse still is the fact that they have been sold with high ground rents that double every 10 years, 25 years or are linked to RPI (the retail Price Index)

The majority of leases pertaining to leasehold houses we have seen have also onerous fees that must be paid to the freeholder for licences and permissions included in the clauses of the lease.

Many of the tens of thousands of people who have bought leasehold houses from developers also feel that they were not correctly advised at the point of sale. I have spoken to hundreds of purchasers who tell the same story that at point of sale the salespeople working for the developers told purchasers that they would be able to buy their freeholds for a few thousand pounds once they had owned the property for the required two years. The vast majority however have found that their freeholds have been sold to large institutional ground rent investors without ever being consulted and these investors are now asking for £40,000 to sell them the freehold of their homes.

There is also huge anger from the purchasers that the solicitors they paid to advise them on the purchase of their houses did not advise them correctly about the implications of the ground rents and terms of the lease. Many contracts I have seen from the developers have directions that the solicitors the purchasers must use for the conveyancing should be “Nom Sol Only” i.e the solicitors named by the developers.

It really doesn’t smell right does it?

Why were the houses sold as leasehold in the first place?

Developers are saying it was just the ‘custom’ imagesin that area to sell houses as leasehold but that is simply not the truth.

Except for a few very rare circumstances there is no reason at all that a house should be sold as leasehold except to make the developer more money. Even in those rare cases where houses must be sold as leasehold due to restrictive covenants on the land, there is no reason to make the ground rent anything but a peppercorn and less reason to include onerous clauses in the lease.

If you look at the additional revenue it brings you can easily see why the developer is tempted. We have seen many house sold to ground rent investors for between £7,000 £16,000 per home or more. This additional income brought in many tens of millions of extra ‘profit’ for the developers.

For many of the developers to get this lovely extra ‘profit’ they have willingly sold their clients, the purchasers of their houses, into huge future debts from the ground rent they have to pay, the monstrously disproportionate fees to purchase their freeholds, regular fees for licences and permissions they require from their new freeholder and service charges etc.

A cursory scratch below the surface shows many of the directors of the house developers were also directors of many of these professional ground rent investors, the smell just gets worse! A cynic might come to the reasonable conclusion that if the leases were intended to have been sold to the home owners all along, why would developers include high ground rents and onerous clauses in the lease at all. Unless of course that the intention was always to sell to ground rent investors all along?

Although the developers have done nothing illegal in selling your houses to a third party professional ground rent investor, was it a moral thing to do? Is it a good way to treat a client of yours? Was this a fair thing to do?

I say categorically not!

Why do ground rent investors buy the freeholds?

For money and a lot of it too!

They make money from:

  • The ground rent you pay every year which is pure profit.
  • Charging you an admin fee to chase late ground rate payments.
  • The money they get when people want to buy their freeholds.
  • Any applicable sub-letting fees.
  • For the various licences and permissions, they can charge you.
  • Sometimes on building insurance.
  • Sometimes on service charges.

So, what are your options?

OPTION 1 – You may be able to sue your conveyancing solicitor for professional negligence.

img_5880.jpgAs you already know, it is not easy to sue a solicitor, after all they do this for a living. It is not enough to believe or feel that you were inadequately advised, it is all about how much proof you have.

Your first job is to get a copy of your file from the solicitor who advised you when you bought your house. You can do this yourself by simply writing to your solicitor or you could instruct a solicitor to do this for you.

Your solicitor has to provide you with this report but there is no legal timeframe for them to do this by.

What are you looking for in this file?

The most important document is something called your “Report on title’. This is the report on the pros and cons of you buying this property. A report on title can be two pages to 15 pages long.

This is the document that could give you the proof you need to sue your conveyancing solicitor.

The most important bit of your file to look for is the part where it explains the ground rent ground in your lease and the implications it will have for you in the future.

You will also need to check all the documents in your file too to see if any other documents your solicitor provided you in your report included advice on the ground rent of the lease.

What are your chances of suing?

This is very subjective and not meant to be used as an absolute guide to you chances of success of suing but it’s a fair guide.

If your file does not even mention your ground rent or their implications you could have a very good chance of suing.

If your file shows the solicitor simply states your ground rent is “£250 per annum” with no other advice you may still have a good case to win.

If it says “Ground rent is £250 and doubles every 10 years” but does not other any other advice you may still win but a solicitor will try to assert they did advise you.

If your file says “Ground rent is £250 doubling every 10 years and this could be bad” then your chances of success are reduced even further as the solicitor will insist they had properly advised you.

If it says “Ground rent is doubling every 10 years and might be bad so advise you get valuation on advice and advise on implications” then the solicitor has advised you about the ground rent and if you did not take a valuer’s advice then I’m doubt you would have any kind of case against them.

It is also worth carrying out the same process on the valuer you used to establish the market price for your home. Did they advise you on the onerous ground rent clauses? What does their file say?

Once you have looked at the pack, if you feel you have a case you will need to instruct a solicitor to sue them for professional negligence. There are many solicitors who would do this for you on a ‘no win, no fee’ basis. You need to ensure that the solicitor you choose should have a proven track record of successfully suing large solicitors for professional negligence and not just pick the cheapest or most eager to work for you.

Also keep in mind that the test for professional negligence is a two-part test.

  • The legal test – conveyancing solicitor had a duty of care which was breached causing loss.
  • Layman test – Had we been told we never would have bought the house (or would have negotiated better terms)

OPTION 2 – You can buy the freehold of your home

Broadly speaking there are three different ground rent schedules I have seen these leasehold houses.

  • Doubling ground rent every ten years. This is by far the worse one and is considered onerous.
  • Doubling every 25 years. This is not as bad and is not considered onerous.
  • Linked to RPI. This essentially means the ground rent you pay is linked to inflation and technically you pay the same amount each year forever more and this is also not onerous.

You need to keep in mind however that all these ground rent options are totally needless and exist for the sole purpose of creating an asset class for the ground rent investors.

Under the 1967 Leasehold Act you have a legal right to force your freeholder to sell you the freehold of your home if you have owned your home for more than two years.

Why should you bother?

The benefits are:

  • No more ground rent.
  • You now own your house and the ground it sits on.
  • No more sub-letting fees.
  • No more licences or permissions to pay.
  • No more dealings with your freeholder.

How much should it cost you to buy the freehold of my house?

How much it should cost is a three-part calculation2017-02-06-9-08-23-515-_93907167_katie-kendrick-1_5000x500 but only one of these calculations is applicable to most of you as you have long leases.

So, to work out how much it should cost we need to work out just one aspect of your lease. How much is the total ground rent you owe your freeholder for the remainder of your lease?

Many have ground rent doubling every 10 years for 5 multiples and remaining at that level for the remainder of your lease, these are by far the worse of the ground rent schedules.

If your ground rent is £295 on these terms the total ground rent you have been signed up for is 4.6m over 999 years. If it is a 250-year lease, then the total amount is ‘just’ a 1m!

Luckily for us, that is not the calculation because we are able to take into account the effect of inflation. As a pound today will be worth much less in 100 years from now.

The key point of this calculation is the percentage we use to do this calculation; it’s called the capitalisation rate. The higher the rate the better for the leaseholders, the lower the rate the better it is for your freeholder.

We have seen many valuations from people wishing to buy their freehold directly from their freeholder. In every one of these the freeholder is quoting a 5% capitalisation rate.

What does that mean in pounds and pence?

If your ground rent is £295 doubling every 10 years is around then the cost of buying your freehold is around £26,000 based on your freeholders 5% cap rate.

If you changed the capitalisation rate to 6% then the cost to purchase your freehold would be around £19,000. If it was 7% then you would be looking at around £11,000

For a house with a ground rent of £195 that doubles every 25 years or linked to RPI it would be £6,625 to buy your freehold based on a 5% cap rate. Around £4,500 for a 6% and £3,200 on a 7% cap rate.

So as you can see, the rate used makes a huge difference to you.

To put it in perspective the capitalisation rates we regularly agree in London are between 6-7% day in day out. Your freeholder is staking out an aggressive stance suggesting 5%. I passionately believe that if there were a group of you acting together you would win this battle.

So what is the process of buying your freehold?

  1. First you need to establish a fair price and work out if you can afford to do it.
  2. Instruct a solicitor to Serve a Section 9 Notice on your freeholder.
  3. You are not required to make an opening offer price.
  4. Freeholder can ask for a 3 x multiple of your current ground rent.
  5. You don’t need to put another offer price in the Notice.
  6. Freeholder has two months to respond but they don’t have to.
  7. Your valuer will start to negotiate with your freeholder on the cost.
  8. You can agree very quickly on the price if both agree.
  9. You have to make the final decision to accept the price on the table.

If your freeholder will not negotiate you will need to take them to the First tier Tribunal.

  1. It costs £100 to apply but can be done as a group.
  2. It costs £200 to attend but can also be split across a group.
  3. You will need a valuer and possibly a barrister to represent you.
  4. The court will decide on what is fair based on the evidence.
  5. The cap rate is the only point of contention.
  6. They may appeal.
  7. It is still worth it if you are a group.
  8. Your freeholder pays their own fees.

If possible you should do this at the same time with a group of your neighbours to make this battle affordable. Based on experience this Tribunal battle may cost you between 6-8k. An awful lot of money if you act alone. If you have a group however:

  • 10 people = £600-800 each
  • 20 people = £300-400 each
  • 30 people = £200-270 each
  • 40 people = £150 -200 each
  • 50 people = £120 -160 each

It sounds like a real pain and it is but it is better than handing £40,000 to your freeholder for your freehold as you could save many tens of thousands of pounds!

Surely, the best thing to do is to approach your freeholder directly and negotiate with them?

I see that a lot of people are doing this. It could be possibly the worse thing to do though, it would be like getting foxes to babysit your chickens and hoping the all play nicely.

Your freeholder has bought your freehold for one reason and one reason alone, to make as much money from you as they possibly can. Do you really think they are going to negotiate fairly with you and give you a good price?

Why would they?

It is also very very important to know that if you try to buy your freehold ‘informally’ for your freeholder you step outside any legal protection you would have if you acted inside the ’67 Act’. Your freeholder can negotiate the very best deal for themselves on the freehold transfer and there is nothing you can do to remove anything from the contract you don’t like, it’s a take it or leave it deal.

For example, we have seen many clauses in the lease where a leasehold house owner is required to pay £300 per room to their freeholder for ‘permission’ to fit a new carpet or bigger costs for permission to carry out alterations to your home. On many informal freehold purchases we have seen that are done directly with the freeholder we see them keeping these fees for the permissions in the transfer.

So you will over pay to the freeholder on their value and find that after you will still need to pay fees for permission to change a carpet etc! Don’t do it!

OPTION 3 – Buy your freehold as part of a group using your statutory legal right under the 1967 Act. 

The very best thing you can do is to buy your freehold as part of a group with your neighbours acting at the same time, the bigger the group the more money you will save. There is an economy of scale when you act as a group but it will also give you formidable  negotiating power against your freeholder when trying to agree a fair price.

How do you choose which Solicitor and valuer to use?

It is tempting to choose the cheapest ones based on quotes you get from the various professionals but with the leasehold world cheap is not always the best option for you, you will only have one chance to get this right and you don’t want to end up in an even worse situation after you complete on the purchase of your freehold because you chose the wrong valuer or solicitor.

I strongly suggest that you choose a solicitor or valuer who are members of ALEP as all of these have had to prove they have the expertise to work for you in freehold purchases and are generally the best in the industry at what they do.

How acting as part of a group is the best way through this.

It will save you money on:

  • The valuation fees involved.
  • The solicitor’s fees involved.
  • The actual price you pay for your freehold.
  • Sharing any Tribunal fees.

This is the only way you will end up paying a fair amount for your freehold.

fullsizeoutput_5d1Through no fault of your own you have found yourselves trapped in the spiders web of leasehold where very clever groups of people now have a financial interest in your homes and see you as a nothing more than a ‘revenue stream’ for them and their investors.

This is very clearly a very morally bankrupt situation and it has caused many thousands of people who bought these house untold stress and heart ache. However, your developers have done nothing illegal in selling your freeholds and the ground rent investors have done nothing illegal in buying them. This is the awful world of leasehold!

You will need to skilfully use the law to free yourselves from the grasp of these faceless investors and take control of the financial destiny for yourselves and your family.

It is therefore essential that you don’t rush into the wrong route to rectify this or choose the wrong professional to help you to do it. Do your research well, take your time, question everything, trust no-one and make sure you fully understand your options before you act.

I hope this article has helped you a little and I wish you all the very best of luck.

©Barcode1966 – 2017

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