Tory MP Stephen McPartland questioned last week whether investors in the ground rent ground fund Long Harbour are “hedge funds and speculators”.
Long Harbour, founded by William Waldorf Astor, has claimed publicly that its £1.4 billion ground rent fund holders are pension funds, although ultimate beneficial ownership is always hidden and some of the assets, it accepts, are owned offshore.
But Mr McPartland was raising the issue of Six Hills House in his Stevenage constituency, a shared equity site where the leaseholders face doubling ground rents every 15 years.
The freehold is owned by the secretive Adriatic Land 5 Limited.
This means a raft of mortgage lenders, notably Nationwide, will not lend on these homes so they are unsellable.
I beg to move, That this House has considered Adriatic Land 5 Ltd, Stevenage. It is a pleasure to serve under your chairmanship, Mr Bailey, and to be here today to debate the impact of companies such as Adriatic Land 5 Ltd with the Minister.
Mr McPartland told the House, sitting in Westminster Hall:
“Who are Adriatic Land 5?
“We found it very difficult to find information about them, but we have had some help. We now understand that Adriatic Land is a residential freeholding company of various formulations, managed by the Long Harbour Ground Rent Fund.
“All Adriatic Land companies hide their ultimate beneficial ownership behind the directors of the Sanne Group, which has its headquarters in Guernsey.
“Long Harbour is a £1.4 billion fund and claims to have revenues of only £4 million on the ground rent fund, with a total of £340,000 in profits.
“Its sister company, Home Ground, told the Select Committee on Housing, Communities and Local Government in November 2018 that it collects £32 million per year in ground rent.
“Long Harbour claims to be investing in residential freehold primarily for pension funds, but there is no evidence of this, and there is a belief in the wider industry that predominantly hedge funds and speculators are behind it.
“Buyers of leasehold properties can be seen as tenants on a very long-term rental, while the freeholder owns the land that the home is built on.”
The BBC reported the debate here:
Up to 150 flat owners are “trapped” by potential ground rent rises, leaving them unable to sell their homes, an MP has claimed. Homeowners at Six Hills House in Stevenage currently pay £300 in ground rent a year. But this can be doubled every 15 years, which Conservative MP Stephen McPartland described as “unfair”.
The debate took place on February 27 2019, so there is a fair chance lobbyists for Long Harbour will have paid Mr McPartland a visit in the meanwhile.
Here is an example of Long Harbour lobbying that badly backfired:
Adriatic Land 5 Limited is referenced by Open Corporates here:
The buyers at Six Hills House, a converted office block, are “predominantly teachers, police officers, nurses and other public sector workers”.
“… Adriatic Land 5 do not seem to be providing any services, but are charging tenants in order to make a profit, and that is causing a great deal of disruption.
“In Six Hills House in Stevenage, it is preventing mortgage companies from offering mortgages.
“The homeowners in the flats are trapped, and that has caused huge concern among these decent public sector workers, who have tried to do the right thing and get on the housing ladder, and now seem to be trapped in the first home that they have bought.”
Mr McPartland read from the correspondence of one of his consituents:
“I live in a fairly new department block of flats in Stevenage that were built in 2016 called Six Hills House. I moved in in November 2016 and brought a 45% share as a shared ownership help to buy scheme.
“This year it came to light that the lease has a clause in it that states the ground rent (which currently stands at £300 per year) will double every 15 years with a break at 90 years.
“Whilst this wasn’t a problem for lenders in 2016 when the flats went on sale, it has since become illegal for leaseholds to include this type of clause and has therefore made the flats unsellable to anyone other than cash buyers.
“I have recently put mine up for sale and whilst I found a buyer within a week, no banks would lend on the mortgage and so the estate agents have advised that I cancel all other viewings and limit to cash buyers only.”
Heather Wheeler, one of two housing ministers, replied, inter alia, that free advice is available from the Leasehold Advisory Service, which has a new interim chair and that “I am confident that the standard of advice that leaseholders receive will be further strengthened”.