“HOUSEBUILDERS CASHING IN ON LAND-VALUES? 

How dare they muscle in on our Scam.” SAY BANKSTERS

Leasehold scandal: the banks that won’t lend on homes with damaging ground rents 

Developers hid damaging ground rent clauses in new-build homes, leaving them unsellable 

·        Sam Barker The Telegraph14 JUNE 2018 • 5:20PM

An investigation has laid bare the scandal of doubling ground rents affecting hundreds of thousands of people who own leasehold homes.
Some of Britain's largest developers, most notably Taylor Wimpey, have been selling new-built properties that let the freeholder charge high ground rents and, in some cases, have rendered homes unsellable.

Some leases contain small print that mean ground rents can double, creating huge bills for home owners and saddling them with a house very few would want to buy and which any new buyers might struggle to get a mortgage on.

Last December the Government announced plans to stop unfair leasehold terms, including a ban on most sales of new build homes with these terms.

But six months on and there is still no sign of the ban.

While most housebuilders have voluntarily stopped selling homes with unfair ground rent terms, until the ban comes in there is nothing to prevent this practice continuing.

Earlier today the consumer group Which? published a report showing how the top ten largest mortgage lenders approach unfair ground rent charges on leasehold homes.

Some take a hard line, others are more relaxed.

Lloyds Banking Group (including Bank of Scotland and Halifax)

These lenders will get conveyancers to assess if a home has unreasonable clauses in its lease. Cases are then handled individually.

Nationwide

The building society takes a hard line on the issue. It was the first lender to change its rules when news of the leasehold scandal broke.

The lender will turn down mortgages on new build homes where ground rent charges exceed 0.1pc of the value of the house. It will not lend at all on cases where ground rent can double.

RBS (including NatWest)

These banks require conveyancers and valuers to judge leasehold terms are “reasonable” before they grant a mortgage.

Santander

The bank will not lend on properties with “excessive leasehold cost increases”.

Barclays

The company will not lend at all on leasehold houses, but will on leasehold flats. The lender’s conveyancers will flag up cases with “unreasonable” leasehold terms.

A Barclays spokesman says: “We are supportive of not lending to properties with onerous terms and escalating ground rents.”

HSBC

This lender will lend on all leasehold properties, though there must be at least 30 years left on the lease at the end of the mortgage term. However, the firm will not lend in cases where there is “excessive or unreasonably escalating ground rent”.

Coventry Building Society

The company will take action if it thinks ground rents are “excessive or unreasonable” and will judge these cases individually.

Virgin Money

Richard Branson's lender will extend mortgages to homes with escalating ground rents. However, it says these have to be “reasonable” and cannot harm future house prices or ability to sell the home.

Yorkshire Building Society

The lender will grant loans to leasehold properties with initial yearly ground rents of up to £1,000. It allows clauses that lets these double, but says any review of ground rent cannot take place any sooner than once every 21 years.

The lender takes this relaxed approach because it does not want to see borrowers locked out of mortgage deals.

A Yorkshire Building Society spokesman says: “We haven’t completely restricted lending on properties with ground rents as we believe that people should have a choice when it comes to the home they want to buy.”

TSB

The lender will judge mortgages on leasehold properties on a case-by-case basis.

Michael Robson 15 Jun 2018 8:04AM

Re comment below - quite right the banks are taking the a stand that government should have imposed and walking away from such arrangements. It protects the banks' own position to do so of course but at least it should help curtail future ground rent arrangements.

There is no earthly reason for developers to sell houses as leasehold, other than the opportunity to sell on the ground rent rights on to another party for an extra cut, but creating a nightmare for the uninformed buyer down the line.

Classic Taylor Wimpey. TW's decision to increase short term profits by reducing the size of its land bank will make it highly vulnerable to margin evaporation in the longer term as land prices rise and they eventually have to replace historically held low price land with very expensive land.

Hopefully we will then see the end of this most hideous and short term thinking company.

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Russell Ridout 15 Jun 2018 1:05AM

The title of this article seems a little misleading as it says "Leasehold scandal: the banks that won’t lend on homes with damaging ground rents"

This suggests that banks are at fault for not lending - but surely the banks that will not lend on homes with damaging ground rents are working in the best interests of their customers. 

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Aloysius Jones 15 Jun 2018 8:55AM

@Russell Ridout They are working in the best interests of themselves, and considering the risk of being stuck with a repossessed property in event of default where the bank itself would be subject to ground rent and unable to sell, that is a pretty real risk to not want to take.