The British government is paying £6 billion to end the privatization of military housing

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The British government will pay real estate group Annington almost £6 billion to buy back 36,000 properties in the Ministry of Defense housing estate, ending a legal battle over their future.

The so-called Married Quarters Estate was privatized to Annington on a long-term lease in the 1990s. But the government did it tried recently regain ownership of the assets through the property right of disenfranchisement.

The move sparked a dispute with Annington, the real estate arm of billionaire Guy Hands’ private equity group Terra Firma filed a legal challenge to the government’s attempt to scrap the deal last year.

Defense Secretary John Healey said on Tuesday that the agreement to bring the homes back into public hands was a “decisive break from the failed approach of the past” and would allow the government to improve conditions for military personnel and their families.

Under the controversial £1.7bn deal in 1996, Annington had originally signed a 999-year lease of around 55,000 properties. The Ministry of Defense then rented the houses back at a discount over a shorter period of time and agreed to cover the costs of renovation and maintenance.

According to the Ministry of Defense, taxpayers are £8bn worse off as a result of almost 30 years of privatization carried out in the final years of John Major’s Conservative government. It said the buyback would save £230m on rent every year.

The price paid to terminate Annington’s long-term lease on the property represents a 13.5 percent discount to the fair value of the properties in March 2024, according to the real estate company’s annual report.

Ian Rylatt, Annington’s chief executive, said it agreed to the deal to end a “costly and distracting legal battle”. On Tuesday, the company also offered bondholders to reduce its £3.7 billion debt pile by repaying some bonds.

The government said the deal would “mark an end to an arrangement that has seen the taxpayer spend billions of pounds on rent payments for military accommodation while remaining liable for rising maintenance costs”.

The real estate group has also exercised its rights under the deal to sell thousands of units no longer needed by the military over the years.

The Defense Ministry launched an attempt in late 2022 to regain control of some of the properties under concession rights that allow leaseholders to repossess properties at a court-agreed value, which Annington refused, leading to a lengthy court battle.

The property group separately took the Conservative government to court last year to challenge its new lease reform laws.

The company said Tuesday’s deal would mark “an end to all ongoing litigation.”