Kensington
How building was arranged
The owners of landed estates did not employ builders to construct houses for them. Nor did builders buy the land on which they built houses. In Victorian times, construction involved a kind of “joint venture”. The landowner entered into an agreement with a builder, permitting the builder to put up a specified number of houses on an area of land. Usually the houses were designed in detail by the land owner’s architect, or had to be approved by him. Once the builder had constructed the houses, the land owner would grant him a lease of each house.
The lease would be for a term of at least 80 years. Unlike today, when the builder would have to buy the land for a substantial amount, the Victorian arrangement was that he only had to pay the ground rent and no purchase price. (It was called “ground rent” because it was the annual rent of the ground. The house value was ignored because it was the builder, not the landowner, who paid to build it).
Once the house was constructed, the lease would then be granted. The builder could then make his profit, either by actually selling the house with its 80 year lease for a lump sum or by renting the house for a full market rent of, say, £300 per annum to someone who would live there.
The builder had to finance the cost of constructing the property. Even if he eventually sold the constructed house for a lump sum, he still had to find the cash in the meantime. So builders generally entered into deals with financiers who put up the capital for the building work. In the early days these were often wealthy individuals, or the builder’s solicitors, for example, and in later times insurance companies often took on the role. To protect their position, it was often agreed that the lease of the house would be granted direct to the financiers, not the builder.
Sometimes a builder would be unable to afford the total development cost of land allocated to him, in which case he might sub-contract the work to other builder/speculators and land owners would then agree to the leases being granted to the other builders.
House building was an extremely risky business in Victorian England and a very high proportion of the well-known builders of the period went bankrupt. This was partly because there seemed to have been some severe dips in the property market, and partly because builders were often slow to note changes in buyers’ tastes. For instance, they often carried on building houses that were too large, without taking account of the change in taste to smaller houses or even flats.
