Developer Taylor Wimpey’s profits have dived 24% after the firm set aside £130m to help buyers hit by the leasehold scandal.
Pre-tax profits dropped to £205m in the year to July 2, the firm said yesterday.
It announced in April that it would set aside the money, in a sign that it believes it could be held to account over leaseholders who bought homes with high or escalating ground rents, making their properties unsaleable in future.
The Government is currently consulting on moves to ban future sales of new homes where ground rents can regularly double, making the properties unsaleable.
However, the focus seems likely to be on those home owners who already live in houses sold as leaseholds in recent years as developers tried to maximize their gains.
According to Sebastian O’Kelly of the Leasehold Knowledge Partnership, a charity which aims to protect leaseholders, as many as 100,000 homes are “unsellable as a result of this trickery”.
He said: “In short, plc householders have been systematically cheating their own customers.”
The question is just who could be held accountable if, as predicted, a PPI-style industry of ambulance chasers and compensation seekers springs up to help aggrieved members of the public.
The Daily Mail queried: “With regard to the leasehold scandal on newly built homes (and leasehold properties generally), how was this not spotted by the solicitor and mortgage lenders?”
Rob Hailstone, of Bold Legal Group, said: “Most (if not all) solicitors and conveyancers would have ‘spotted’ the rent increase clause in a lease and would have pointed it out to their buying client and any mortgage provider, along with a lot of other important issues.
“The sad fact is that in many cases, their buying client will not read or act upon the advice given. Most buyers will want to proceed, understandably, with their purchase as quickly as possible, head down and with rose tinted glasses on.
“Solicitors are not valuers, estate agents, or mortgage providers; their clients can calculate as easily or as difficultly as they can as to what the future rent might be.
“This issue raises the bigger issue of home buyers not fully appreciating what their conveyancer or solicitor is doing for them, protecting their best interests.
“The moral of the tale is, when your solicitor sends you something to read, read it, and if you don’t understand it, talk to them.
“If they can’t provide the further advice you then need, they will advise you who can.
“Having said the above, I accept if the rent increase clause was not ‘spotted’ and highlighted, the solicitor/ conveyancer in question may be at fault.”
If there is a mis-selling scandal on a similar scale to that of PPI, there could be a scenario with ‘no win, no fee’ claims firms springing up, and developers having to constantly top up their contingency funds against pay-outs.
If solicitors and mortgage lenders are also held to account, as the Mail has suggested, it is not impossible that estate agents could also be implicated under Consumer Protection Regulations if they did not upfront warn buyers of leasehold homes where ground rents, for example, double every ten years or where buying the freehold could cost thousands.
Cynical marketing to mislead/exploit customers and maximise profits out of them at any cost to them. Where have we heard that one before?
Of course, there will be a certain poster on PIE claiming that home buyers could not possibly have been misled into making a decision to buy, because there is no way they would not have realised the problems the leases would cause them!
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Rob Hailstone usually talks a lot of sense, but not this time. Our experience is that solicitors pointing out (often “spinning”) negative factors about a property, cause us endless issues on sales. I simply cannot accept that buyers being cautioned by their solicitors on such a matter as cumulating ground rent costs, would simply roll over and accept it.
And if I was a solicitor in such a situation, I would have a huge fat book tucked down the back of my trousers to cover my a**e in PI terms, by way of large, double bold print written caution to the client of such an issue!
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when you take legal advice as you do when you purchase a property then provided the issue was highlighted to the client the solicitors should be in the clear.
If this condition is fair or not is another question, if the purchaser didnt understand what the solicitor highlighted is another area of concern.
The doubling clauses are a scammy way of doing things and even if highlighted to the first buyer they may well have though that they arnt going to be in that property for 10 years or 20 year so its not going to affect them in paying out vast sums.
Hopefully the clause will be nulled and replaced with reasonable ground rent from the unfair contract & terms act.
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I don’t think the issue is necessarily buyers rolling over and accepting, more a case of either not reading or understanding a lot (maybe too much and sometimes complicated) information being sent to them.
When I reported on a lease for my clients, and if they were unable to come to my office, I would send them a copy of the relevant pages (i.e. a copy of the rights, restrictions and covenants etc) with the most important clauses highlighted by a marker pen. I would also report on the term of the lease, the rent and any rent increase provisions. If there were any clauses or provisions I felt were unreasonable or unclear I would mention them in particular to my client and any mortgage provider involved and offer further help or advice.
My ‘rule of thumb’ was, if I wouldn’t buy a particular property because of any legal issues I would advise my client not to buy it. In short if it wasn’t good enough for me, it probably wasn’t good enough for my client. Ultimately their decision, not mine of course. Thankfully, if I used the phrase, ‘personally, I wouldn’t touch this property with a barge pole’, and because they trusted me, in the majority of cases, they would not proceed.
It is obvious that the way properties are bought, sold and owned, in many cases needs improving and, hopefully, steps are being taken for that to happen.
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I suspect that a lot of the buyers (especially first timers) will have used low cost conveyancers instead of qualified solicitors. A solicitor would have understood and reported on Title accordingly. All so often “conveyancers” do not understand leasehold.
I also agree with Typhoon’s comments.
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One really cannot win. Either Solicitors “spin” (and by that I presume the contributor means “inform the client and the lender”) the issues or they don’t bother telling their clients about the issues. Which is it?
1 Not all conveyancing is undertaken by firms regulated by the Solicitors Regulation Authority, ie Solicitors, as opposed to Licensed Conveyancers.
2 The job of a Solicitor when dealing with any purchase is to assure the purchaser and any lender of “good title”. Whilst the estate agent may be focussed on making a sale and getting people moved as soon as possible that is not the primary concern of a conveyancer. What may seem like spinning of negative issues is in fact warning the purchaser and the lender of issues and letting the purchaser and lender decide if they wish to proceed. The emphasis is on letting the purchaser and lender DECIDE if they wish to proceed. We act for both the purchaser and lender in those circumstances. Each will get a copy of the report. As Rob says, it is highly unlikely there won’t have been a report done-and yes that will protect the conveyancer especially if the client signs to say they have read it. If they chose not to read it or proceed anyway having read it then Caveat Emptor!
3 I am aware that a CMC-that is a Claims Management Company-is drumming up potential claims against everyone under the sun in relation to leaseholds. A similar tornado was directed in regards to Right To Buy properties-after the surveyors had been fleeced-towards solicitors. Those cases ended unsatisfactorily with one PII insurer settling whereas two others went all the way past the door of the Court and the claims were dropped. The target of the CMC will include estate agents so I wonder what evidence they will be able to adduce to their insurers that full details were given of the leasehold and its terms. Luckily for most Estate Agents the main focus will probably be on the builder and on the conveyancer because PII insurers of Solicitors are seen as an easy target and builders are perceived as rich. It is suspected that some rogue estate agents hide the fact of leasehold so as not to put off purchasers, and I doubt they will escape from a claim or some form of censure.
4 If the Government wish to end this nonsense all they have to do is to pass legislation which makes any future leaseholds unlawful, retrospectively turns all leaseholds into freehold and to be registered as such, causes rents to be repaid thus ending the nonsense effectively and immediately.
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