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Monday 17 June 2019

McCarthy & Stone falls on Government housing reforms

Communities Secretary Sajid Javid said it was unacceptable for home-buyers to be exploited by unfair practices.

McCarthy and Stone
McCarthy and Stone

By Ravender Sembhy, Press Association City Editor

Shares in retirement home builder McCarthy & Stone tumbled after the company said it would be hit by the Government’s new clampdown on unnecessary leaseholds and ground rent charges.

Communities Secretary Sajid Javid said it was unacceptable for home-buyers to be exploited by unfair practices, as he announced a ban on the sale of new-build leasehold homes.

Ground rents will also be set at zero for new long leases on houses and flats, while the Government will work with the Law Commission to support existing leaseholders and make it easier, faster and cheaper to buy a freehold or extend a lease.

However, McCarthy & Stone said it will be caught in the crossfire and is seeking an exemption for retirement housing providers.

McCarthy & Stone makes money from charging home-owners ground rent and then selling on the freehold to third-party investors, so will be hammered by the changes.

The firm said the practice is expected to glean £33 million in profits next year, which are now at risk.

Shares fell more than 8% in morning trading to 154.9p.

The company insisted it does not build leasehold houses and does not employ the types of “escalating ground rents” that have caused concern.

Its retirement apartment model incorporates an annual leasehold ground rent charge to “ensure that the long-term maintenance” of the development is effectively managed on behalf of elderly home-owners, the firm said.

McCarthy & Stone chief executive Clive Fenton said: “The proposal to set all ground rents to zero will result in a disruption of housing supply and contradicts the Government’s stated objective of seeking new sources of housing.

“We understand and support the need for action to address leasehold housing and aggressive escalation clauses for ground rents; however, this blanket approach will result in reduced housing delivery as well as choice for ordinary people.

“We are disappointed that our representations on this topic and those submitted by others within our sector have not been directly reflected in the Government’s response.

“However, this is the first in a number of steps and we will continue to work positively with DCLG (the Department for Communities and Local Government) to ensure they recognise the importance of retirement housing in the face of an ageing population.”

Press Association

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