/ Money

Leasehold housing scandal: have you been affected?

There are a series of issues around leasehold new-build houses – including clauses that make ground rents rise to thousands of pounds a year. Isn’t it about time this system was fixed?

Update 19/03/2019

The Housing, Communities and Local Government (HCLG) select committee has today launched a new report calling for an overhaul of the leasehold system.

Read our latest news

It recommends replacing leasehold with commonhold for flats in England and Wales and setting ground rents to a peppercorn rate. It also advises the Law Commission to investigate compensation for the possible mis-selling of homes with onerous ground rent clauses.

Original convo 14/06/2019

Along with issues of onerous doubling ground rent clauses, today’s Which? Money investigation has highlighted issues with developers selling freeholds to third parties without informing the homeowner, and unreasonable fees for everything from changing a doorbell to having a pet.

The government plans to bring in legislation to ban spiralling ground rents and stop houses being sold as leasehold – but what of those people already trapped in properties that are effectively unsellable?

Key issues explained

We’ve looked at three key areas that are causing heartache for homeowners. First up, let’s look at doubling ground rent clauses.

It’s common for leaseholders, especially in flats, to pay ground rent to the feeholder. However, the amount isn’t capped, and at least one developer has been inserting clauses into leases that make those payments double every 10 years. Paying £295 a year now? In 50 years’ time it’ll be £9,440.

The next key area concerns freehold sales and punitive permission fees. Developers have been selling freeholds on to third party investment companies without notification. If the leaseholders are able to get in touch with these companies, they’re confronted with astronomical costs to purchase the freehold.

In many cases, freehold sales to third parties have resulted in punitive ‘permission fees’, where the leaseholder has to pay the freeholder to ask to make alterations to a property. Some leaseholders report being charged £108 just for a response to a letter.

Finally, there are issues in buying and selling leasehold homes. Sellers are struggling to shift their properties at market value, while buyers are seeing their mortgage offers revoked. For example, Nationwide and Santander are both refusing to lend on doubling ground rent clauses.

Loosen the leasehold noose

Housebuilder Taylor Wimpey has set up a fund to cover the costs of converting leases so that ground rent rises in line with RPI, rather than doubling every decade, but we’ve found that obtaining the ‘Deed of Variation’ (which changes the lease) can be a lengthy process.

It’s also an option only available to people who bought directly from Taylor Wimpey, so those who’ve bought second-hand properties are effectively stuck.

The government launched a consultation last year, and in December confirmed its plans to overhaul the leasehold system, though its main focus is on stopping these issues arising for homebuyers in the future.

It’s also working with the Law Commission to try to help homeowners who are already facing the problems we’ve uncovered – for example, it has pledged to investigate making freehold purchases ‘easier, faster and cheaper’.

Unfortunately, this process is likely to move very slowly, so it could be some years before homeowners are truly offered the redress they’re waiting for.

Have you been affected?

We want to see firm action from the government to protect home owners and ensure that no-one loses out as a result of these unfair practices in the future. It’s not acceptable that some families are being ordered to pay extortionate fees under threat of losing their home.

If you’ve experienced leasehold issues we want to hear your stories. Let us know what happened and if you’ve been able to resolve the situation. Do you agree that it’s about time the government puts a stop to this scandal? Let us know.

Comments
Phil says:
14 June 2018

” the last rebellion in Scotland Churchill sent in the troops+tanks to George Square ”

1919, DL-G was PM and tanks were also sent to Liverpool along with HMS Valiant which had orders to shell the city with her 15″ guns if considered necessary. A riot in Luton resulted in the town hall being burnt down and the Metropolitan police went on strike.

The UK probably came closer to revolution in 1919 than at any other time since the Civil War. It wasn’t merely a Scottish thing.

Patrick Taylor says:
15 June 2018

I bet pound to a penny that the Valiant’s officers and crew would themselves have mutinied if an order to live shell was given.

Phil says:
19 March 2019

Such a deployment would never have happened without prime ministerial approval and the tanks never left their stabling area in Cattle Market.

Cathy gale says:
14 June 2018

My house has an onerous doubling ground rent and is unsaleable. Taylor Wimpeys conversion to RPI is an absolute farce and does not this rip off. I have 3 children 2 of whom have special needs and we are unable to move. New build houses are a scam. Unregulated maintenance fees and high council tax are a massive issue.

I feel sorry for you Cathy , in normal house purchase in Scotland as Freehold those things you mention dont apply , nobody I have ever met has a leasehold on a house but in tenement property there is usually a factor for each close but if you get together the laws in Scotland allow you to give him the boot and get somebody else . Its something I have never figured out when living in England , feu,s in Scotland were stopped long ago but English Land Law is still working on feudal masters logic. Why not change English Law to replicate Scottish in this regard ? I own the mineral rights and air space on my property , what has happened to- “an Englishman’s home is his castle ” ?

David Way says:
14 June 2018

Also leaseholders in mixed use buildings have the less rights of all. Just because you own a home above a commercial unit you are still a owner. Freeholders can charge excessive building insurance charges, management fees. And hold the leaseholders to ransom. Something need to be done to bring this problem in line and make mixed use buildings a fair home to buy a lease in.

NEVER, EVER agree to using a developers conveyancing soliticitor when buying any property.

As previously posted, Bloor Homes waited until I had found a buyer for my own house and I was at the deposit stage to proceed when they dropped the bombshell. I was to use their own solicitor (although I had already appointed my own) not only for the purchase of their property but also to complete the conveyancing of my own home, as they maintained they could guarantee completion in 1 month.

I beat a hasty retreat out of their sales office ASAP, leaving the coffee and biscuits untouched, which resulted in my buyer pulling out of the sale of my home, but at least the whole ghastly experience was at nil cost to myself.

The housing market in England has been in need of regulation for a long time to prevent the exploitation of young first time buyers and unsuspecting others being ripped off by developers who seem hell bent on manipulating all legal procedures involved in order to suit their own ends and getting away with it!

A contribution from Which? Mortgage providers would be welcome here (well, by me anyway). Just how do they look at tricky leases and do they search for lenders who don’t bother, or would they advise clients about the pitfalls before proceeding?

Do not conveyancing solicitors have responsibility for pointing out potential problems when purchasing a property? My impression was they were there to draw the buyer’s attention to such matters, for example covenants, likely adjacent development, so surely onerous lease conditions should be included? If so, should they not be held liable for compensation?

Patrick Taylor says:
15 June 2018

They are liable, very liable, but of course carry indemnity cover and it would be interesting to know the current cases and what individual cases are going on and settlement figures. However we are talking of the legal profession and they seem to have managed to keep this under wraps. Whether the dreaded Non-disclosure agreements are being use I do not know. However I would argue that they are inappropriate in a consumer interest case based of professional misconduct.

The SRA [Solicitors Regulatory Authority] perhaps should be looked to [at] for some detail as to what is going on.

Will we see conveyancers/solicitors struck-off. In fact surely the SRA should have been aware some years ago that clients were being stitched up. So perhaps Which? could see if the SRA is a paper tiger. It is perhaps unfortunate that it regulates Which? Legal services as this does present a conflict of purpose.

The problem is Malcolm, they wait until you have proceed a long way down the slippery slope until it makes it harder to pull out before they announce the bad news and there are no legal procedures to prevent them doing so, especially if there is a long chain of prospective buyers involved. Their own solicitors are expert at bending the law and are no doubt suitably rewarded for doing so by big developers.

Kathryn Cavanagh says:
15 June 2018

Our story is sadly all too familiar with others. We knew we were buying a leasehold (we were moving from a leasehold house which had no permission fees and was only £40 per year with no increases. Our sales advisor flipantly skimmed over the leasehold details and advised we could buy at any time. Due to the costs of the move and having a 4 month old baby, we decided to defer until we were in a position to do so when I returned to work. 2 weeks after moving into the property (just before christmas), we were sent a letter to say our freehold had been sold onto Aviva, with no prior notice or offer to purchase. We used the builders (Morris Homes) recommended solicitors, who were shambolic – too many things to list. Just feel so betrayed that in effect, our freehold was primed and ready to sell onto Aviva before we even moved in – shame on these people for exploiting hard working families just trying to get by and have a home they can call their own!

N Martin says:
16 June 2019

this was exactly our experience of Morris homes. I queried the bad press leasehold had been getting and told that they weren’t one of the cowboys. I queried if we’d be in a house where we couldn’t pout a new kitchen in or make changes inside and they said of course we could. I darent even go through the paperwork to double check this. They even asked if tens of thousands of people would be buying these new builds if it was as bad as some of the horror stories in the press. we were told wed be able to buy our freehold in a year or 2 when it might be more convenient. Said it’d only be a couple of grand. everything was so reassuring and it never occurred to me a company would outright lie to their customers. Howe I wish I had recorded those conversations. We moved in in the November and by February they had sold it on. I feel sick now, also pressured into using their solicitors to ensure all went through okay. If it weren’t for help to buy, we wouldn’t be in this position as wed have had to go for a cheaper older house. This is a state sponsored rip off.

Patrick Taylor says:
15 June 2018

With great sadness I read the article and this Conversation. Which? was absent when needed and I only hope that the new CEO of Which? has some fire in his or her belly on this major major issue.

The suing of the solicitors/conveyancers is a major story in its own right and this consumer charity has to be much bolder in highlighting the wrongs and the penalties for those legal advisers who failed their customers so badly. Perhaps Which? can explain to readers the way that solicitors like Shoosmiths [Barretts] get appointed to “panels” which can be a cosy arrangement with the builder.

Anything less than full reporting by Which? in what is the biggest , most expensive, longest running consumer scandal will stain the reputation of the charity.

I have written extensively to the ordinary members of the Consumers Association, which owns Which? Ltd, as they are “shareholders” as well as subscribers and I can write to shareholders. Subscribers I cannot contact as I have no access to the addresses.

The Guardian and other newspapers touched on the problems years before the Nationwide seems to have realised that what it was lending on was toxic. To Nationwide’s credit they did make a dramatic move at the start of 2017 but I find it galling that a Building Society appeared more aware of the problem than the UK’s consumer charity. Hence my call for big bold moves by it now.

If you wish to look back at the warning signs and also the shoddy building saga please do so in order that you can appreciate how long manipulating and milking housebuyers has been going on. Several years ago in Holland, to solve the problem of badly completed houses, a mandatory major retention is made. What a complex idea [not] for a consumer body to campaign for.

I have in my time agreed mortgages, read hundreds of leases, and managed blocks of flats, so in a way have seen all the components of the housing market.

Last year I suggested a quick fix for the problem and that was that “charges” and Ground Rent, essentially all the leasehold fees, are covered by a new tax rate of 90% in the £ in which case the value of the Ground Rents – in theory say £250 a year will actually only produce £25 and therefore be of relatively little value to an investor.

This will of course upset those firms who have bought them. Not mentioned by Which? is some of the purchasing companies are actually owned by the builders. Funny that. There are also serious investors involved however as many are offshore I really do not think we need to feel embarrassed if they make a heavy capital loss. HM Government could of course buy them back at perhaps a mot tp disatrous price if it felt it necessary. Some of the purchasers were apparently UK pension funds though a full breakdown should be possible to the enterprising investigator.

This is not a matter that should be dealt with slowly as families are suffering now. This, the UK’s largest consumer body needs to get heavily involved in the whole area after a decade of neglect. Members should make this point long and loud to Which?. There is a replacement CEO in September lets give her/him a worthwhile agenda.

Patrick Taylor says:
15 June 2018

From Companies House:
ADRIATIC LAND 2 (GR3) LIMITED Matching previous names: PERSIMMON GR (NO 3)

SO selling the freeholds to one of your own companies ….. cute or bad faith with the housebuyer. They now have intermediaries buying the freeholds I think to make it less obvious.

For more details this from the Guardian in 2016
theguardian.com/money/2016/nov/05/ground-rent-scandal-engulfing-new-home-buyers-leasehold

Robert Reading says:
11 July 2018

I Purchased my flat in 2001 and was encouraged by the Estate Agents that it was a great buy with more than 77 years left I will not even be around. The Solicitors did not caution me that the time remaining would be an issue in the near coming years.
Now 2 years ago the Landlords have issued me with a reminder that I need to consider renewing my lease very soon . My Solicitors contacted the Landlords and they are looking for about 20% of the current value plus increased ground rent from £10 Per annum to £500..

To me that’s criminal . I had a big life changing operation recently and can not afford this huge cost on minimum wage. This money for doing next to nothing is a scam/ its not adopted in many other countries and is a greedy scam’ that should have been outlawed 40 years ago.
The Builders/Developers should not be able to sell the land you have a property on and sell it on for profit
just to sit on it to make easy money ;Older properties deserve the same as many new ones 999 years .

Wayne Evans says:
15 August 2018

I have just emailed you asking to raise a new campaign on Ground Rent fees. Recently charged £40 ‘admin fee’ for being late, which I challenged. That has now escalated to a late payment fee of £100 and being passed to Solicitors, which will add more fees. I did pay half the bill and offered half next month, which I did. That was not acceptable. In the past, I took these fees to the House of Commons library via my MP, but essentially they can charge what they want. They are just corporate bullies and are very aggressive with their actions, quite out of tune with the UK currently. Modern highwaymen. No regulatory body either that you can complain to. Mine are Homeground Management Ltd and Estates & Management Ltd.

I thought the managing agents could only charge what was specified in the lease for the late payment of the ground rents. The fees are part deterrent and part compensation for the administration required plus, possibly, the cost of any borrowing to cover a shortfall in the amount payable to the freeholder on the due date. I am not condoning extortionate fees and agree that excessive levels [i.e. over and above the reasonable actual costs incurred and any losses attributable to late payments] need to be challenged. It would be worth you checking your lease to see what is stipulated and whether the agents are complying with it in making such charges. Ground rent collection should not be a significant profit centre but cannot make a loss.

Patrick Taylor says:
15 August 2018

JW – I have read well over one hundred different leases and certainly pre-2000 I cannot recall reading any lease that specified charges in relation to non-payment or late payment.
It would require great foresight in a 999 year lease ….. They may well exist though.

I was Company Secretary to many many flat management companies owned by residents and also a few owned by outside freeholders. I was also the Chairman of a self managed development of 36 flats that had an interesting history where some owners were members of the freehold owning company and others elected not to buy a share.

Ground rent collection could be a loss-making process where ground rents were originally set at a fair amount in 1850 but either do not have arrangements to increase or if they did they have not kept place with inflation.

AFAIR there have been zombie type freeholders where they collected nothing but have been taken over by people/firms versed in interpreting leases and arranging for charges for historic breaches of the lease terms. If memory serves they were active in the NorthWest post 1980.

There can be no doubt that the leasehold system has been heavily exploited in the past couple of decades and Which? has completely failed in it’s self proclaimed role of protecting consumers against ……..

I do really believe that the British public as a whole have been lulled into an unfortunate belief that there are bodies – charities and quangos looking out for consumer interests – and that they are therefore safe.

We only have to look at the current situation to know that the public has been badly mislead and also let down badly by the legal/conveyancing profession.

Thank you, Patrick. I was unaware that there was no agreement in place concerning late payment of the ground rent. On what basis does it have to be paid on time then? Presumably the default legal mechanism is breach of contract. In Wayne’s position it should be possible to avoid paying the ground rent until the managing agents’ can produce evidence of a legitimate fee scale [not a unilateral one that they have concocted] or commence action for breach of contract [non-compliance with the lease terms].

Mary says:
16 June 2019

Leaseholder 2006.
I was happy to pay and enjoy my expensive new home.
The new taps in the kitchen gleaming in chrome.
Living the dream to own a new home all happy and content in my Countryside Properties home.
Little did I know that this my slice of heaven had attracted the the attention of others far away in their warm exotic heaven had taken a shine to own what little I have.
Why I ask has my simple world collided with them these wealthy and affluent men?
who have lives of luxury beyond my belief such privilege because of course ……..its my leasehold and it belongs to them!!!