Taylor Wimpey (TW.) has raised a few eyebrows by setting aside £130m to address problems associated with properties it sold on a leasehold basis between 2007 and 2011. In short, the freehold of some properties were sold on to an agent, and the terms of the lease were that ground rents were to double every 10 years for 50 years. The problem here is that there is nothing to regulate what the freeholder can charge if the leaseholder wants to buy the freehold. Other builders including Persimmon (PSN) have been selling a small number of leasehold properties, but it is understood that the terms of the leases are nothing like as onerous as those at Taylor Wimpey. Galliford Try (GFRD) sold a very small number of houses on a leasehold, but this was only when the houses were built on leasehold land. Additionally, the company's standard lease provides that the ground rent is set at the market rate, with reviews linked to retail prices index (RPI) inflation and no more frequent than every five years.
Taylor Wimpey has promised to attempt to reach an agreement with new owners of the freehold, or where this is not possible to pursue other avenues to help customers. The problem is certainly one for concern. One example cited an annual ground rent of £295, which doubling every 10 years would reach £9,440 a year in 50 years' time. However, in inflation-adjusted terms that would be significantly less.
It's also fair to point out that nearly all apartments are sold on a leasehold basis and that there are 1.8m leasehold properties in the UK. Potential buyers should be aware of the terms covering the lease, if not by studying them personally (and they can be complex if not opaque) then through the services of an expert in leasehold properties, or one of the many registered charities who work to protect vulnerable leaseholders.