First Help to Buy leaseholders receive payouts over cladding scandal

Luke Ryder cladding flat owner - Christopher Pledger for the Telegraph
Luke Ryder cladding flat owner - Christopher Pledger for the Telegraph

Help to Buy customers living in blocks with dangerous cladding have secured payouts of thousands of pounds after the company managing the scheme was found to have caused “unreasonable” delays.

Target, which has administered the scheme since 2016, has been ordered to pay compensation to several flat owners after the Financial Ombudsman stepped in.

The Telegraph has seen seven ombudsman judgments, with one customer securing more than £14,000 in compensation from the subsidiary of the tech giant Tech Mahindra.

The ombudsman decisions now pave the way for more cladding victims to seek compensation, with an estimated 5,700 Help to Buy leaseholders living in affected blocks.

Help to Buy was launched by George Osborne in 2013 as a way of boosting homeownership.

The Government provides equity loans to help cover the cost of a deposit, with customers paying this back when they sell or buy a bigger stake in their property. If the property rises in value, customers pay back more, if it falls they pay less.

Since the 2017 Grenfell tragedy, hundreds of thousands of leaseholders across the country have found themselves unable to sell their homes due to cladding.

This month Michael Gove, the levelling up secretary, has said he would ban property developers who did not sign up to a contract that would make them responsible for fixing defective cladding.

Help to Buy customers have found it particularly hard to sell or buy a bigger stake due to Homes England, the government body behind the scheme, repeatedly changing the valuation rules.

This has been further compounded by poor customer service at Target, with the ombudsman identifying cases where people have waited years for sales or redemptions to go through.

Luke Ryder recently received a £10,000 payout after he waited two years to redeem his loan. The delay meant his property increased in value, and the amount he had to pay on the loan went from £90,000 to £98,000.

He said: “It's hard to put into words just how frustrating and distressing the whole situation was. I never imagined that, three years on from when I first tried to redeem, I would still be here fighting this battle.

“They make you feel so utterly powerless, as if there's nothing you can do. It's absolutely awful.”

The ombudsman ruled that this was an “unreasonable” delay caused by Target and ordered the company to pay back the difference, as well as £1,000 for the inconvenience caused.

In another judgment, delays caused by Target meant a leaseholder was left paying for two homes. Target was again ordered to pay the difference but also costs related to a second property, including service charges and mortgage payments. These total at least £12,000.

Most significantly, the ombudsman has ordered Target to pay back the interest the leaseholders have paid on their Help to Buy loan while waiting to sell. In some cases, people have paid £350 a month in interest for several years while waiting to move.

Giles Grover, spokesman for End Our Cladding Scandal, said that this was a significant moment for hundreds of Help to Buy customers who had been left trapped in their homes while continuing to pay out thousands of pounds to Target and Homes England.

He added: “We have repeatedly called on the Government to freeze interest payments for cladding victims so it is important that these are being repaid to leaseholders too.”

Peter O’Connor, chief operating officer at Target Group, said: We have been working hard to address the issues at hand, partnering closely with Homes England, to put in place procedures to help navigate this difficult set of circumstances and ease redemptions.”

A Homes England spokesman said: "Our focus continues to be on helping customers to find a solution as quickly as possible, however we recognise that this has been difficult for a number of customers.”