Taylor Wimpey to bear £130m lease hit

Hamish Champ

House builder said the leases were introduced in 2007 “in good faith”

Taylor Wimpey is to post a £130m hit to its accounts following a review into its controversial ‘doubling rent’ clauses.

The company admitted that the clauses, which saw ground rent on Taylor Wimpey-built properties doubling every 10 years until the lease’s 50th year, had caused some of its customers “understandable concern”.

It declined to say how many properties were affected, but said it would bear the cost of the difference between the doubling rent clause leases and newer – and much cheaper – ground rent arrangements.

Taylor Wimpey said the leases were introduced in 2007 “in good faith” and were “entirely legal”. It noted that it stopped using them in “late 2011”, after which it began using clauses based on RPI.

However some affected homebuyers remained unhappy, and the firm undertook a review which began in November last year and concluded recently.

In a statement Taylor Wimpey said it was clear from its review that the impact of these doubling rent review clauses was “now causing some of our customers understandable concern.

“We acknowledge that the introduction of these doubling clauses was not consistent with our high standards of customer service and we are sorry for the unintended financial consequence and concern that they are causing. 

“In line with normal practice the relevant freehold reversions have been sold by the group to a number of third parties over a number of years. For those customers who acquired from, and remain the owner of a Taylor Wimpey leasehold property which is subject to this specific doubling clause, we have already entered into negotiations with the respective owners of the majority of the freeholds to alter the terms of the doubling lease to materially less expensive ground rent review terms, with the group bearing the financial cost of doing so. 

“In the event that we are not able to reach agreement with individual freeholders, we will continue to pursue other avenues to help our customers.”

The £130m will be recorded as an exceptional item in Taylor Wimpey’s 2017 first half accounts.

In a trading update the firm also revealed its total order book value had risen 2% in the first 16 weeks of the year compared with 2016, to £2.2bn.

It said the £130m lease provision would not affect its plan to pay out £1.3bn in total dividends by 2018.

 

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