Taylor Wimpey's Doubling Ground Rent Fund

Taylor Wimpey, one of the UK’s largest housing developers have set aside £130m for their Ground Rent Review Assistance Scheme to help qualifying leaseholders amend their leases from doubling  ground rent to an inflation linked increase. But what does this mean?

Leasehold is a legal term for purchasing a property without owning the actual land. This means that although you own your home you will have to pay a ground rent to the freehold landowner. 

Ground rent is rent paid so that the developer retains value in the land that the leasehold property sits on (the freehold land). This value also helps calculate premiums on lease extensions so a good ground rent means the developer (or the investor who purchases the freehold) has a long term valuable asset.

A large number of Taylor Wimpey’s leasehold developments were sold with a ground rent which doubled every 10 years. For instance, your 125 lease started in the year 2000 with an initial ground rent of £300 per annum. Assuming the ground rent doubles every 10 years, in 2010 the ground rent will increase to £600 per annum. In 2040 when leaseholder should give serious consideration to extending their leases, the ground rent would be £4,800 per annum. If the lease remains unchanged for the entire term, the ground rent would be £1,228,800 per annum for the final 5 years.

While it is extremely unlikely a long leasehold property will run all the way to the end of the term, it is clear that there is substantial value being eroded from the lease and being acquired in the freehold which will therefore increase the premium when you look extend your lease.

As a general rule, Lenders will not lend on a property with less than 80 years left to run as at this point, the calculation for determining the premium gives the freeholder an even larger premium. Therefore at some point, you will be required to extend the lease if you look to sell after the term is below 80 years which can be a costly exercise.

Additionally, because of the amount of rent which can be payable over the term of the lease, Lenders will generally not lend on properties with a doubling ground rent as this is considered unmarketable.

The consequence of a Lender not lending on a property means that when it comes to selling; only cash buyers will be in a position to buy. This substantially reduces the number of potential buyers and can therefore affect the value of the property.

But all is not lost. Taylor Wimpey has set aside £130m to help leaseholds rectify this issue by paying for their legal fees in amending the lease so that increase in ground rent is linked to inflation rather than doubling.

Attwells are here to act for you in dealing with this issue. We can draft and negotiate the legal documents needed to amend the lease giving you peace of mind; all of which can be paid through the fund set up by Taylor Wimpey if you qualify. Attwells have experience of working with Taylor Wimpey’s lawyers on rectifying these doubling ground rent leases.  

If you have any questions or would just like to discuss this further, please call Phillip Hewett on 0207 449 3139 or e-mail Philip at philip.hewett@attwells.com