MOD wants to buy back thousands of homes it sold in 1990s
The Ministry of Defence (MOD) is looking to buy back thousands of properties it sold off more than two decades ago.
In 1996, the MOD sold more than 55,000 service family homes across 770 sites to Annington Property Limited in return for a £1.66bn upfront cash lump sum.
The MOD has since rented them back on 200-year underleases, paying more than £178m a year for more than 38,000 properties, having surrendered some homes.
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Annington says when the MOD releases homes back to them, they are sold or rented in the open market.
As of September 2021, Annington valued its married quarters estate portfolio at £7.9bn, according to a financial statement published by the company, while the vacant possession value was estimated at £10.1bn in July 2021.
A 2018 National Audit Office (NAO) report said it found that, mainly due to actual house price increases over the first 21 years of the contract, the MOD was up to £4.2bn worse off over that period due to the sale and leaseback arrangement than if it had retained the estate.
The report stated that although the house price and rent increases could not be foreseen, the MOD's assumptions at the time of sale were "over-cautious" and noted how the returns to Annington Property Limited had been "significant".
It indicated how the MOD business case model assumed house price increases of 1% per year excluding inflation – with a 3.9% increase, excluding inflation, now the actual figure.
Minister of State for Defence Procurement Jeremy Quin said in a statement to the House of Commons on Thursday that the MOD will "explore the exercise of its statutory leasehold enfranchisement rights to buy out Annington's interest in the homes and gain full ownership rights".
"Initially, the MOD has made a single claim for one house, with the intention to submit a further claim in respect of another house in the near future," he added.
"If the cost of recovering full ownership of the units from Annington is less than the present value of MOD's ongoing liabilities, such a transaction is likely to represent good value for money.
"Annington, through its lawyers, has notified the MOD that it is considering the impact of the claim and has put the MOD on notice of a potential dispute."
In a statement, Annington told Forces News: "Annington is of the firm view that the MOD has no legal right to exercise statutory leasehold enfranchisement rights to buy either the house which is the subject of the test claim or any others.
"Annington will be taking all legal steps available to it to resist the MOD's claim on this single house and any other enfranchisement rights claims brought by the MOD, should they be forthcoming."
Terra Firma acquired Annington from Nomura International in 2012 for £3.2bn.
According to Annington's website, the company is "one of the largest providers of privately rented housing in the UK" and "owns over 40,000 homes with an asset value of over £7bn".
"Presently, more than 95% of our portfolio is leased to the Ministry Of Defence (MOD) on a 200-year contract," it adds.
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