Taylor Wimpey has set aside £130m to compensate customers saddled with unmanageable ground rent charges, apologising for the "financial consequence" of its controversial policy.
The issue has become politically fraught, with politicians promising to crack down on a practice that Taylor Wimpey today admitted was "not consistent with our high standards of customer service".
Taylor Wimpey's total order book value increased two per cent for the first quarter of 2017, up from £2.1bn to £2.17bn, with the number of homes rising from 8,811 to 9,219. Subject to approval from shareholders at the company's annual general meeting, the housebuilder plans to increase its final dividend to 2.29p per share (from 1.18p per share last year).
Cancellation rates fell to 10 per cent, from 11 per cent for the same period in 2016.
The housebuilder said the UK housing market "remained positive". At time of writing, Taylor Wimpey's share price was flat at 198.9p.
Why it's interesting
The government has made it clear that it will crack down on developers' punishing leasehold terms.
Homeowners with a leasehold property should normally pay a nominal amount in ground rent, such as £100 a year. However, a market for selling on freeholds has grown, and developers have started increasing the amount they charge in ground rent.
Not only have ground rents become significantly more expensive, developers have also been demanding lease terms that make the ground rent double at an unreasonable rate, with some ground rents doubling every five years.
The issue has left many homeowners stuck with rapidly rising bills, as they are unable to sell on properties with such unfavourable lease agreements, and banks often refuse to lend on such properties.
What Taylor Wimpey said
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 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."