DCLG Consultation Paper On Leasehold And Ground Rents - Statement

31 July 2017

McCarthy & Stone supports the need for action on unfair leasehold practices, including for ground rents. We do not build leasehold houses and our ground rents are on fair terms. We agree there have been cases where the system has been abused by some and DCLG should take action to protect homebuyers.

Leasehold is a common and widely accepted form of tenure for apartment living and has traditionally been used as an efficient way of managing apartment blocks and managed estates that contain a number of residents on the same site, often with competing voices. With best practice and proper guidance in place, it can work well, and has done for a number of years, and the vast majority of apartments are on fair terms.

As with all leasehold properties, ground rents are a condition of the lease for McCarthy & Stone’s apartments. The focus of DCLG’s consultation paper relates to proposals to restrict leasehold houses, which McCarthy & Stone does not build, and ground rents that double every ten years, which ours do not. Our ground rents are fair, are fixed for 15 years and are reviewed on the fifteenth anniversary of the date of commencement of the term and each successive fifteenth anniversary from that date. Increases are linked to either the movement in the Retail Price Index (RPI) since the last review, or if greater, by 2% per annum. While leases for our new developments are set at 999 years, increases in the ground rent end after 125 years.

DCLG’s consultation paper also asks for views on limiting ground rents in new leases and we will be liaising with DCLG on this point to agree what the level should be. Our ground rents are already set at levels comparable with the broader housing and retirement market. Research by Direct Line in 2016 found that ground rent fees for non-retirement new build properties average £371 per year. Our ground rents are typically between c.£400-£500 per year depending on the product, number of bedrooms and location. Within the M25 area, they range from c.£500-£600 per year. The slight increase compared to open market prices reflects the larger size of our retirement developments as our schemes include significant shared facilities such as the lounge, the laundry, the guest suite, staff areas, and, in some developments a dining room, restaurant and mobility scooter room. Once the additional space and facilities in a retirement development are factored in, our ground rents are broadly comparable, and they are also in line with those charged by other retirement developers.

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