Developer buys back freehold amidst leasehold reform proposals
A developer has recently agreed to buy back a number of freeholds that it had previously sold to an investor.
The agreement between Countryside Properties and E&J Estates comes in the midst of governmental scrutiny of residential leaseholds, with a consultation having recently been launched.
In a letter delivered to a leaseholder from E&J Estates, the investor stated that it had been working with Countryside to resolve the problems that residents had been faced with. The letter, as reported by Property Industry Eye, stated: “Having confirmed that the lease upon which you hold your property contains such as doubling rent review clause, we have been working with Countryside to resolve the issue.
“As a consequence we have completed the sale of the freehold on your property back to Countryside.”
Whilst this move has been praised, it has also been the subject of criticism, with campaigners from Leasehold Knowledge Partnership stating that it does not go far enough. As well as claiming that certain cases had been excluded from the buy back scheme, the campaign group also stated that it had so far only been agreed on four or five sites.
Following the announcement that the leasehold process would be reformed, E&J Estates was featured in mainstream media, having stated that it would no longer purchase leaseholds with doubling ground rents. Across the UK, it owns or administers around 50,000 primarily residential assets from ground rents.
In a statement, E&J recently set out how it intended to support the reform process, stating that its freeholds would soon come under review.
“In June 2016 we launched a review of lease terms across our entire portfolio and found 1,961 leases, representing about 3.9% of the portfolio, had been drafted by developers to contain a 10-year doubling of ground rent.
“Since then we have been working hard to change all of these leases such that the ground rents will rise by no more than inflation. This has been a complex process.
“In respect of the 519 leases where the lease income is under our control, we have agreed amendments with 423 leases such that ground rents will not go up by more than inflation. We have contacted every other leaseholder affected and hope to have completed the changes shortly.
“In respect of the leases that we administer but where lease income is contracted to third parties, we are in advanced negotiations with counter-parties in order to change the lease terms such that ground rents will not go up by more than inflation, and expect to reach a conclusion in the coming weeks. We will then be contacting affected leaseholders to seek their consent to make these changes.”
Commenting on plans for its own review, a Countrywide Properties spokesman stated: “Wherever possible, we sell properties on a freehold basis. Where we have to offer leasehold properties, we endeavour to make sure that they are affordable on both an initial and ongoing basis.
“Additionally, we have conducted a comprehensive review of properties we have sold on a leasehold basis and have concluded that the vast majority of these homes carry little or no financial risk to the occupier. However, for a small number of leases, we recognise that the 10 year doubling of ground rents increases too quickly and have taken action to address this issue.
“We welcome the Government consultation on leasehold reform and we will of course comply with all recommendations and legislation that comes from it going forward.”