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Ground rent: ‘We feel like prisoners in our own home’

Nathan Stewart
Nathan Stewart pays ground rent of £300, which will double every 10 years. Photograph: David Levene for the Guardian

Thousands of young homebuyers remain trapped in virtually brand-new homes made unsaleable by spiralling ground rents and abandoned by developers such as Taylor Wimpey, despite a ban on the charges promised by the government.

Guardian Money can also reveal that the £5bn John Lewis pension fund is behind the soaring rents that have made the lives of some homeowners a misery.

Nathan Stewart, 27, contacted us after the sale of his home in Soham, Cambridgeshire, fell through last month. His buyers had agreed to pay £175,000 for the detached coach house, built by Taylor Wimpey in 2011, but the deal collapsed when their lenders refused to grant a mortgage against the property. The reason? Taylor Wimpey sold the house as leasehold, but with a clause whereby the ground rent doubles every 10 years for 50 years, at which point the fee is capped at £4,800 a year. It’s currently £300 a year (a fee for which no service is provided) but halfway through the 109 year lease, this will have increased to £4,800.

Many banks now flatly refuse to lend against properties with these doubling leases, making them effectively unsaleable. “We feel like we’re now prisoners in our own home. We’re also about £2,500 out of pocket after the sale fell through,” says Stewart.

Money has previously highlighted the offshore vehicles, tycoons and aristocrats that have snapped up freeholds across Britain to extract high ground rents. But what will surprise many people is the role of John Lewis’s pension fund. The freeholds on the estate where the Stewarts live were sold by Taylor Wimpey to a group called Fairthatch GR Ltd, but documents at Companies House name the John Lewis Partnership Pension Trust as entitled to receive all the ground rents paid by homebuyers.

The documents reveal that John Lewis’s pension fund is, through Fairthatch alone, picking up ground rents from 62 housing developments across England and Wales, comprising nearly 3,000 homes, with the assets valued at more than £17m. Many ground rent practices were condemned last month by communities secretary Sajid Javid as “feudal” as he announced a ban on leaseholds on new-build houses.

Javid added that he would force developers to cut ground rents to zero on all future apartments and houses – but for those who bought before the ban, the agony continues. Stewart has pleaded for a “deed of variation” that would cut the burden of the spiralling ground rent, but was told by Fairthatch’s administrators, Estates & Management, that no variation would be allowed. It also refused to sell him the freehold.

But it is Taylor Wimpey’s behaviour that most angers the Stewarts. The developer has set aside £130m to help homebuyers affected by a leasehold scandal, but the money is only going to those people who bought directly from the developer. If the house was sold on a year or two later, Taylor Wimpey says it has no legal responsibility.

In a statement the company says: “The Taylor Wimpey assistance scheme is available to customers who purchased their home directly from Taylor Wimpey. Secondary customers are excluded as Taylor Wimpey have had no legal relationship with them, were not party to their property transaction and, as such, have no visibility of the information provided between the parties. For customers who did not buy from us, we are advising them to contact their freeholder directly to discuss what options may be available to them with regards to their lease.”

Taylor Wimpey’s response has infuriated Stewart. He says: “The company’s oppressive and unethical leasehold terms, sale of freeholds and reluctance to support innocent homeowners has left myself and thousands of homeowners imprisoned with properties that are near-impossible to sell.”

Guardian Money approached Fairthatch through Estates & Management, and put a series of questions to the company. It says: “Please be advised that our client have declined an invitation to provide a comment.”

The most immediate hope for “imprisoned” buyers is if John Lewis’s pension fund relents and puts pressure on Fairthatch to offer better terms. An alternative route, being pursued by some buyers, is to sue their conveyancing solicitors for failing to point out onerous ground rent clauses.

In a statement, John Lewis says: “We are aware of concerns about the terms of some of the leases ... For leases that are not covered by the Taylor Wimpey scheme, the trustee is not currently able to agree to a variation of the leases. However, the trustee is exploring whether it may possible to vary these leases in the future. These discussions are ongoing and are commercially confidential.”

Like many pension funds, John Lewis’s pension scheme was attracted to what on paper appear to be a lucrative and guaranteed income from ground rents: a doubling lease is equivalent to a guaranteed income of 7% a year at a time when few other investments yield more than 1%-2%. These streams of income were sold to pension funds by the companies that have snapped up ground rents around England – and while the likes of John Lewis owns the stream of income, they don’t necessarily own the underlying freehold.

One of the big ground rent companies, Longharbour, is understood to be voluntarily offering deeds of variation to “second-hand” buyers locked into doubling ground rents. Unfortunately for the Stewarts, their freehold at Fairthatch is not with Longharbour but is ultimately controlled by the Consensus Business Group, which boasts that it has “amassed a portfolio of over 300,000 residential freeholds worth over £4bn”.

Consensus is itself ultimately controlled from the British Virgin Islands through the Tchenguiz Family Trust. Multimillionaire Vincent Tchenguiz is reported to have homes in Mayfair, St Tropez and Cape Town, plus a 130ft yacht on the French riviera.

But back in their rather more modest home in Soham, the Stewarts are hoping the “confidential” discussions John Lewis’s pension fund is having may soon produce results. He says: “Action to support homeowners like ourselves needs to be faster and fairer. Thousands of hardworking, innocent people are being exploited due to greed with, at present, no solution or end in sight.”

In December, the government promised it will “make it cheaper and easier for existing leaseholders to buy out their freehold and there will be better information available about redress for those consumers who face the most onerous terms.” For the Stewarts, that reform can’t come soon enough.

Caught in the leasehold trap? A Facebook group, the National Leasehold Campaign, helps and supports victims, while the Leasehold Knowledge Partnership - at leaseholdknowledge.com - is a vast resource of news and advice.

• This article was amended on 24 January 2018. An earlier version said the ground rent would double every 10 years to £307,200 by the end of remaining 109 year lease. Taylor Wimpey have contacted the Guardian to say the fee is capped at £4,800 per year after 50 years.

This article titled "Ground rent: ‘We feel like prisoners in our own home’" was written by Patrick Collinson, for The Guardian on Saturday 13 January 2018 07.00am

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