Annington Homes offers £105mn to settle MoD housing estates claim

Guy Hands’ Annington Homes has offered to spend more than £100mn to upgrade UK armed forces’ housing, warning rejection of the proposal will result in the company taking legal action to stop the Ministry of Defence taking back ownership of the vast estate.

Annington bought the forces’ housing in 1996, but the government last week unveiled plans to unwind one of its most costly privatisation deals by using the so-called law of enfranchisement.

Annington published a letter to the MoD on Wednesday saying that it would spend £105mn on improvements to the estate if the government agreed to drop its legal action.

The letter also asked if the MoD’s legal move was an extension of a deal proposed by disgraced financier Lex Greensill, who in the past claimed to be acting for the government with a proposal to buy out Annington.

A person close to the MoD said that the Greensill offer was historic and had been rejected as a “waste of time” by all parties when it was raised.

Annington added that it was “genuinely shocked” the MoD was “acting in this way, and is seeking without notice to tear up a longstanding agreement”. It said the move sent “a dreadful signal to businesses which rely upon the good word and good faith of government”.

The letter threatened to block the government’s move with legal action that would incur “huge sums in legal fees and take many years”.

The MoD sold 57,400 properties to Annington Homes in 1996 for £1.7bn. The portfolio is today valued at £7.6bn, while the MoD has to pay close to £183mn a year in rent as well as the cost of maintenance of the 38,000 remaining homes in the estate.

The letter from Baroness Helen Liddell, chair of Annington, which is owned by Hands’ business, Terra Firma, was sent on Tuesday night to Ben Wallace, defence secretary, and Jeremy Quin, minister for defence procurement.

She said that Annington’s solicitors had contacted the ministers setting out the “serious legal issues” that the scheme was subject to, and that demonstrated “it is not viable from a legal perspective”.

The former Labour MP claimed that the government was using legislation intended for an entirely different purpose — allowing individuals to buy the freehold of their property — “to effectively achieve state expropriation”.

People close to the MoD plans said that Hands’ offer was unlikely to be accepted with the government already spending £140mn every year on repairs and the offer representing just a fraction of the value of the estate.

The National Audit Office, the public spending watchdog, said in 2018 that £4.2bn of taxpayer money had already been lost through the deal, given the increase in value of the property after 1996.

Government officials fear financial losses will continue to mount over the course of the 200-year deal struck with Annington.

Under the terms of the 1996 agreement struck by then defence secretary Michael Portillo, the MoD rented back the homes on a lease at a discount but in return needed to cover the costs of refurbishment and maintenance.