Builder Taylor Wimpey says it has made a £130m provision to cover disputes over leases taken out by customers that have left some of them with a doubling in ground rent.
In a statement today, the builder said it entered into the lease structures in 2007 “in good faith”. But a review sparked by customers’ complaints shows the clauses are causing “understandable concern”.
The company said:
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… 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.
As a consequence of this decision, the Group will make a gross provision of c.£130 million that will be recorded as an exceptional item in the 2017 first half accounts, which will have an impact of c.3% of net assets. We expect that the total cash outflow will be spread over a number of years.
More broadly, it said the opening four months of this year have been “good” and that the election in June is unlikely to prove too disruptive.