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Peppercorn ground rents threaten build levels – McCarthy & Stone

  • 07/09/2017
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Peppercorn ground rents threaten build levels – McCarthy & Stone
Cutting ground rents to a peppercorn level would reduce building, house builder McCarthy & Stone has said.

The retirement home specialist said its ground rents are set at a fair level, though it acknowledged that there have been cases of abuse in the system by some.

Chief executive Clive Fenton told The Times that capping ground rent at a peppercorn rate would reduce its output as it would deter investors from buying the freehold.

“These are not windfall profits, these are brought into our land appraisal and impacts how much we can afford to pay for land,” he told the paper.

Fenton’s comments follow July’s consultation on banning leasehold arrangements. Affordable housing providers have already suggested the reforms would stymie community-led housing.

In its earlier response to the DCLG consultation on leasehold and ground rents, McCarthy & Stone said government should take action to protect homebuyers, but that leasehold is common and widely accepted 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.

“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.”

The developer’s ground rents are typically between £400-£500 per year depending on the product, number of bedrooms and location. Within the M25 area, they range from around £500-£600 per year.

The levels are fixed for 15 years and increases are linked to movement in the retail price index or set at 2% a year if greater.

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