Freehold Reversions

[Butyaareblanche]

There has been a lot of bad press recently regarding new house builders selling new homes as leasehold properties. I am sure this is not only confined to Barratt, however I have a query which someone out there ay be able to help.

When buying a Freehold reversion I am told that the valuation is dependent on 'market forces' determined by 'institutional investors'. This is usually expressed as a multiple of the ground rent.
This is slightly different to purchasing the Freehold reversion say from a private leasehold company where usually the valuation is  based on house price, length of lease and ground rent which more often than not works out cheaper.

Recently, I have encountered a problem where I purchase the Freehold Reversion at the point of sale at 33 times Ground Rent only to find that my neighbours who didn't exercise this option at the point of sale are now being offered the same Freehold Reversions at 20 times Ground Rent (a 40% reduction!) only eight weeks later.

I am having to put this down to bad timing however, has anyone else encountered this problem? Particularly interested in anyone who has recently been quoted a price for a Barratt Freehold Reversion, the date and the multiple of ground rent it was valued at.     

[New Home Expert]

This seems strange. From what I have seen on the National Leasehold Campaign Facebook Group, buying the freehold at point of sale always worked out cheaper as the builder is selling it not one of the shell companies that buy these freehold off greedy housebuilders.

As you may be aware, the government is in "consultation" with a view to banning the sale of leasehold new houses and other new homes (flats) with unfair lease clauses.  Perhaps with this in mind the other freeholder is keen to avoid any claim later on.

As for your situation, you were offered the freehold at a certain price which you then accepted. The legal definition of a contract.  The fact that a neighbour got a better deal, at a later date, is of no consequence.

[Butyaareblanche]

Further to the reply by: New Home Expert

I would point out that it was house builder who reduced the price of the freehold. So within a span of eight weeks the house builder decided to drop the price by 40%. I suppose that it was just fortuitous that this was only when the house purchasers in the last phase of the development had completed, the 'take-up' of freeholds reversions had been extremely low at the point of sale and they had been left with a 'glut' of freeholds for sale.

As you mention, usually it would be cheaper to purchase the freehold at the point of sale and this is what indeed informed my decision to purchase my freehold in the first instance.

I take your point about the legal definition of the contract however I firmly believe that by the house builder's themselves reducing the price of the freehold within a relatively short space of time, still within the build phase of the development they have adversely impacted the value of my property. This is comparatively speaking to those properties of the same type that purchased the freehold reversion at the lower price only eight weeks later.

This will be the avenue of thought I intend to pursue.
 




   

[New Home Expert]

Depending on timing (end of year figures, stock plots etc.), housebuilders can and are free to reduce the prices, offer deals, give free extras and perhaps in this instance offer freehold at a discount.

Your home will be worth the same as neighbouring homes of the same or similar house type, (subject to condition).
It matters not what you paid in total for it. The market will decide the sale price.
You were happy otherwise you perhaps would have haggled.
It is the fact that others paid less that now leaves you feeling aggrieved.
It is no different to buying a jumper and then finding it ion sale with 20% off the following week.

[Butyaareblanche]

Further to the reply by: New Home Expert

I am afraid I have to disagree!

Barratt's insist that the freehold reversions are based solely on 'market forces' driven by 'institutional investors'. In other words, they are unable to reduce the price of freehold reversions on a whim or even at a discount since they revert solely to this formulae when offering them for sale.

I did try to 'haggle' the price down as you have suggested but was told in no uncertain terms that price of freehold reversions were 'non-negotiable' at the point of sale so I suppose you could say I have been somewhat naive. 

This is perhaps the crux of the problem, a total lack of transparency and bad business practise by new house builders when selling freehold reversions. The purchaser has to accept the valuation is correct since there is no mechanism available to prove otherwise.

If the 'freehold' had been a financial instrument, then I am sure the appropriate 'health checks' would have been put in place by the FSA.   

I don't feel aggrieved and I am sorry if that is the way my issue has been presented. I have already accepted that the £3,250.00 difference is unlikely to be recoverable through any legal route. I am just left feeling somewhat 'ripped off' by a supposedly reputable company. I am therefore reluctant to simply roll over and 'play dead'. I will therefore continue to pursue this issue on both a moral and ethical basis. Hopefully, the government will act to outlaw these sharp practises in the not too distant future.

The analogy of the 'jumper' I have to disagree with since I feel that a 'freehold reversion' is somewhat different. It is simply wrong to compare the tangible with the intangible and draw a comparison. I can shop around for a jumper but new house builders have a monopoly on freehold reversions. 
 

   

[New Home Expert]

I do agree the likes of Barratt and the other housebuilders selling new houses on a leasehold basis have, and are, behaving appallingly.

To say the Freehold price is "based solely on 'market forces' driven by 'institutional investors'" is ridiculous. They own it and can sell it for what they want, which they do - as much as they can get.

In addition Barratt (and most other plc housebuilders) can never be perceived as a "a supposedly reputable company" they are no John Lewis!