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.
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.
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