BH’s PR statement answered

We’ve heard from media contacts covering our story that Berkeley Homes have a standard PR response for journalists, as expected. We are often asked our response to this statement so we thought it may be valuable to analyse their comments and respond publically.

BERKELEY HOMES PRESS COMMENT – USED IN FULL AND UNEDITED

“Berkeley Homes is not alone in having a small number of off-plan customers who are finding it difficult to complete on their purchases, having been affected by recent falling property values and more limited access to credit.

Berkeley Homes understands the difficulties in which some of these purchasers unfortunately find themselves and they would like to find equitable solutions. However, they cannot be released from their contracts or offered price reductions. This would be unfair to the majority of buyers who have been able to complete on the very same developments and who were faced with the same issues. These purchasers, many of whom are investors, all received independent advice from their solicitor on their legal obligations prior to exchanging contracts.

Berkeley continues to work with its customers on an individual basis to try and find a way forward.”

The Collective’s response to the above statement is as follows:

BHC – Whilst we appreciate BH accept there is a distinct problem, and one wider than that faced just by the Berkeley Homes Collective and Berkeley Homes, we suggest that it is a good opportunity and prudent for them to take the lead in tackling the wider problem starting with their own buyers. We refute there is a small number of their off-plan customers affected in this way. As of 11 August 2009 we have over 80 members in our group experiencing this problem. In percentage of off-plan sales in these developments, this is a significant figure. The Collective assumes there are more people in a similar situation who have not yet found us or for whatever reason have not joined the support group. Therefore the number is likely to be greater. Berkeley Homes have, to date, given no quantitative figures to substantiate what they consider a ‘small number’.

“Berkeley Homes understands the difficulties in which some of these purchasers unfortunately find themselves and they would like to find equitable solutions. However, they cannot be released from their contracts or offered price reductions.”

BHC – The group’s core aim has always been to co-operate with Berkeley Homes to find a pragmatic solution to this problem so we are glad BH states it understands the difficulties we face. Our situation has been articulated clearly through reams of correspondence and numerous meetings where homebuyers have explained , in detail, the reasons behind their inability to complete: notably, they could afford to buy the properties at the time they put their life savings down as a deposit; they could not lock in mortgage financing 2 years in advance (as was normal in the off-plan market); the banking system collapsed dramatically; 90% mortgage financing became virtually unavailable; maximum LTVs on new-builds fell to 75%; Berkeley Homes’ products are now valued between 30% to 40% less than contracted prices. All of these factors have left most unable to complete without Berkeley Homes’ assistance. With their life savings held by Berkeley as deposits, buyers are keen to find a way to complete and do not want to default. Berkeley Homes’ intransigence, however, will force these buyers into default.

Individually and as a group, we have tried to maintain an open dialogue in the hope of finding a pragmatic way forward for both parties. Sadly, Berkeley Homes have bluntly refused to enter into this dialogue. We are disappointed that their statement implies that we have only asked to be released from contractual obligations or to be given price reductions. These are merely two of the eleven suggestions the collective, at Berkeley’s request, compiled as possible solutions. To date, Berkeley Homes have dismissed all of the eleven suggestions. Their only suggestion has remained ‘complete at full contract price or we’ll sue you’, an option they know we cannot fulfil.

“This would be unfair to the majority of buyers who have been able to complete on the very same developments and who were faced with the same issues. These purchasers, many of whom are investors, all received independent advice from their solicitor on their legal obligations prior to exchanging contracts.”

BHC – Berkeley Homes’ definition of what is ‘unfair’ is questionable. Their statement implies that all buyers paid the same price, regardless of when they bought. This is incorrect. We know of people buying identical apartments on the same day who were offered different deals. Is this fair on the buyer who paid more? Berkeley Homes have also been routinely reducing their prices in the UK and (especially) abroad since at least 2008.

For example at The Royal Arsenal*:-

1 bed 467 sq ft. sold in 2007 at 250,000
1 bed 467 sq ft. sold in 2008 at 180,000

2 bed 714 sq ft. sold in 2007 at 351,500
2 bed 714 sq ft. sold in 2008 at 310,000

2 bed 685 sq ft. sold in 2007 at 333,000
2 bed 685 sq ft. sold in 2008 at 279,000

*Data obtained from Berkeley Homes staff and UK Land Registry

Saying ‘majority of buyers’ is stretching the truth to say the least. As of 24th July 2009, there were only 36 completions out of 159 flats at Royal Arsenal and only 10 of 79 at Caspian Wharf. 20% is hardly a majority. UK Land Registry records show that many of these were cash buyers (not dependent on mortgages); some bought at deep discounts following the banking system collapse and subsequent housing market malaise and some, under severe duress from Berkeley Homes, simply resorted to acquiring imprudent financing from sources such as unsecured loans, credit cards, and loans from friends and family.

We appreciate that some of the buyers of Berkeley Homes properties are professional investors but members of the Berkeley Homes Collective are verified as homebuyers. In fact, we have turned away professional investors, who face a different set of issues albeit with a similar outcome. We are sympathetic to these buyers, however, they are not represented in our group.

As is standard in any home purchase, we all received advice from our solicitors. In many cases, these ‘independent’ solicitors were the ones Berkeley Homes steered buyers towards because they ‘understood’ Berkeley Homes’ contracts and therefore it would be ‘sensible to use them’. Buyers were also put under sustained pressure to exchange contracts within two weeks. In almost every case buyers agreed to purchase properties with the understanding that a ‘deposit’ meant exactly that. We know now, to our cost, that an off-plan contract means a homebuyer not only loses the deposit on default but can also be sued for ‘damages’, which could easily run into £100,000s and lead to bankruptcy. These were easy mistakes for an inexperienced or unsophisticated homebuyer to make.

“Berkeley continues to work with its customers on an individual basis to try and find a way forward.”

As we have said to Berkeley Homes many times, and we repeat in this statement, members of the BHC are not willing defaulters. They have been forced into default as the unprecedented failures in the banking system have caused the housing market to deteriorate so much so that completion is now impossible.

Individually and through the Collective, we have all been on the receiving end of Berkeley Homes’ attempts to ‘find a way forward’. At best, this has been an intimidating demand for ‘full financial disclosure’ to ascertain our personal financial details, e.g. P60s, bank statements, tax returns, mortgage statements, valuations on current property. We have nothing to hide and continue to have these conversations reluctantly. At worst, this has been an exercise in intimidation where vulnerable (and understandably emotional) people have been pressured to find money from literally any source. One member received correspondence explicitly asking that she explore the possibility of using the value of her parents’ home to raise money to pay Berkeley Homes. They did this despite stating that they appreciate that her parents’ home is not her asset and has nothing to do with her contract with Berkeley Homes.

Despite buyers’ compliance with the demand for ‘full financial disclosure’, Berkeley Homes have, nevertheless, rescinded contracts from homebuyers at Caspian Wharf, pocketed their deposits, and instructed their litigation solicitors to issue pre-action letters. Essentially, their ‘way forward’ is “we will see you in court”.

Berkeley Homes Collective