Dive in profits for developer as leasehold mis-selling scandal looms large

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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.

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Written by: Houseladder