Guardian – Berkeley Homes: Buyers trapped in mortgage nightmare
Today, The Guardian published a full page article on the Berkeley Homes Collective and our Buyer Awareness Campaign.
The Guardian article is a well-written, non-biased factual account of the main issue faced by Berkeley Homes Collective members.
However, the final statement from Berkeley has sadly not been the experience of many members of this group. Its the same old script they keep trotting out in every letter, but it couldn’t be further from reality for most people who have been on the receiving end of this ruthless company’s revenue protection policy.
Berkeley spokesperson told the Guardian’s Rupert Jones:“Berkeley Homes has asked its purchasers to appreciate they cannot be released from contracts or offered price reductions. Manifestly, this would be unfair to those buyers who have been able to complete and who were faced with the same issues. We have sought to help the customers involved and continue to maintain an open dialogue to try to find ways of enabling them to honour their contract with us.”
While Berkeley claim the door is still open and that discussions are taking place, at the same time their lawyers, Davenport Lyons, are busy sending out notices of intended litigation seeking damages running into hundreds of thousands of pounds.
Berkeley have been inviting buyers in for one-to-one meetings where the only item on the agenda is “full financial disclosure”. Buyers are lured into these meetings under the illusion that Berkeley will work something out with them. The Berkeley Homes Collective has always encouraged members to maintain an open dialogue with Berkeley Homes and has advised members to cooperate, however, it is disappointing that those who have cooperated and have demonstrated that while they can access mortgage funding, they do not have any significant assets which could be claimed via litigation, the result has been the same – threatening letters in the post within days from Davenport Lyons. This is simply an information gathering exercise and another opportunity for Berkeley representatives to humiliate their customers and tighten the thumb screws.
Berkeley’s campaign of intimidation goes back at least 9 months for most people. Initially it was a flat refusal to negotiate at all with anyone and then it escalated into threats of legal action (meaning bankruptcy for most) for those who even made enquiries about what would happen if the crash in valuations didn’t reverse itself. Almost every member in the group tells the same story.
There is some truth in the Berkeley spokesperson’s statement above. A few Berkeley Homes Collective members have managed to complete and are still in contact with their friends in the group. It may sound like everyone should be happy since they have the keys to their new home. But the reality is, those that have managed to complete only did so because they faced massive pressure and intimidation from an aggressive and ruthless developer. In virtually every case, backed by relentless threats of litigation, these buyer’s were so scared they took out multiple credit cards and personal loans to top-up the difference between the contract price and their mortgage offers. Some are now so deep in debt, its unlikely they’ll manage to keep up repayments on their new homes. In each of these cases, in addition to credit cards and personal loans, Berkeley have also saddled people with 10-15% second charges on their new homes, previous homes (if these were not sold due to the current market) and even the properties of parents, other family members and friends. If they don’t pay back the second charges in 2,3 or 5 years, Berkeley will be back on the phone again threatening legal action until they get their money. For most this means they’ll be looking over their shoulder for years to come and praying the market returns, otherwise they’ll be chased into court by Berkeley Homes for everything including the kitchen sink.
Classic anecdotal examples of sharp practice include:
- Tim Pettman (Berkeley Salesman) at Royal Arsenal telling buyers they could have another month to complete if they paid another 10% deposit, otherwise their case would be handed over to the legal department.
- Sam Warren (Berkeley Operations Manager) at Caspian Wharf asking buyers probing questions about their retired parents homes and suggesting they put pressure on their parents to remortgage their homes in order to fill the funding gap. Mr Warren is asking first time buyers to go to retired people (in their 60s and 70s) and get them to do an equity release or second charge in Berkeley’s favour on their parents’ homes. These people have nothing to do with the contracts their children signed with Berkeley, so it is insensitive to put this pressure on vulnerable people. And the flip-side of all this is, if you don’t get the money we’ll pass your file to the legal department. Youg professionals have a choice of personal bankruptcy or saddling their entire family with an enormous debt in order to maintain Berkeley’s profit margins.
- One buyer who was just £15k short of the completion moneys, approached Berkeley and was open and honest. He laid everything on the table and explained that due to a bad vlauation (-30%) at Caspian Wharf he was struggling to complete. However, in addition to a mortgage he was able to borrow £25,000 from a friend and so he needed just another £15,000 to get himself to completion. Expecting Berkeley to keep their word about wanting to assist buyers, he hoped they could work something out, perhaps a discount or a deferment. Berkeley’s response was, give us the £25,000 (in addition to your 10% deposit) and we won’t sue you. Otherwise, we’ll see you in court.
We have many more stories to tell and we’ll add them to this blog as members come forward with their real-life experiences of Berkeley Homes “help” and “open dialogue” in action.
Completion Notices Withdrawn
In a surprise move, Tony Pidgley, Chairman of Berkeley Group, phoned Berkeley Homes Collective member Steven Dowd and informed him that as a “goodwill gesture” he was unilaterally withdrawing all completion notices at the firm’s Caspian Wharf development in E3, London.
Having ignored the Berkeley Homes Collective for several months, Pidgley suddenly picked up the phone. Without even introducing himself, he barked down the phone, “Its Pidgley” before getting down to business.
However, Mr Pidgley refused to extend this “concession” to buyers at Royal Arsenal who are also unable to complete due to a crash in valuations of approximately 40% across the board. No reason was given, but its believed that all of the original Caspian Wharf notices had been issued in a batch, so it was now apparent that virtually no-one had completed (Update: 07/08/09 Land Registry data now shows that 10 completions, out of 79 units have taken place). This meant that Berkeley could clearly see that there was going to be a mass default at Caspian Wharf.
The problem at Royal Arsenal is that the completion notices have been issued in several batches (and some have not been issued at all yet), so they are still holding out to see who will complete and who won’t complete before taking action or coming up with “concessions”. In the meantime, buyers are facing immense pressure from Berkeley’s sales people to “find the money”.
The “concession” Mr Pidgley decided to make resulted in a lot of surprised conveyancers at this highly unusual move. However, the completion notices were duly reissued less than one month later so it was largely a pointless excercise and only delayed the inevitable for a few more weeks. Mr Pidgley’s covering letter, which accompanied the withdrawal notice stated that the action was to enable buyers to have more time to arrange funding and also so that he could try to arrange a meeting with John Healey MP (Housing Minister).
Berkeley claims this move was to enable buyers to have more time to “find the money”, however, the Berkeley Homes Collective speculates that the mass withdrawal of completion notices has more to do with Berkeley’s accounting schedule than assisting buyers, especially since it was done at the eleventh hour (2 hours before the second standard 10 day notice issued to buyers had run out) and so just before the majority of buyers at Caspian Wharf would have been officially in default on their contracts. All this just a week or so before Berkeley’s interim results, where many commentators have already noted that Berkeley haven’t bothered to write-down their land bank and have not adjusted their “forward sales” figures, despite the Berkeley Homes Collective telling them for 9 months that 100+ people would most certainly be unable to complete. Our membership accounts for almost 10% of Berkeley’s annual sales, yet Berkeley are still in denial that a problem exists.