Owners of new homes in England with leaseholds are trapped in a cycle of rising fees, punitive clauses, and unsellable homes, according to a new investigation.
After receiving almost 200 letters from leasehold property owners regarding 19 different housebuilders and housing associations, consumer giant Which? launched an investigation into the deepening leasehold crisis.
Leasehold properties require home owners to pay ground rent on their property, usually at a fixed price for an agreed duration before it can be increased.
However, the consumer champion’s investigation highlighted that at least one property developer had included punitive ‘doubling clauses’ in sales contracts that effectively increase ground rent at an alarming rate, trapping people in homes they cannot sell.
The developer’s recommended conveyancers had failed to properly explain these clauses to some buyers, says Which?
One Taylor Wimpey home owner told Which? that six years after purchasing her home she discovered her ground rent fee would double every decade instead of every 25 years, as she had previously been informed by her conveyancer.
Between 2008 and 2058, her ground rent would rise from £295 to £9,440 a year, rendering the property effectively unsellable, with estate agents refusing to market it. The conveyancing firm involved in the purchase, recommended by the developer, later blamed the catastrophic discrepancy on a ‘typographical error’.
Which? received reports from other home owners who believe they were misinformed by a conveyancer recommended by Taylor Wimpey and left with rapidly rising fees.
Taylor Wimpey launched a redress scheme in 2017 to amend leases so ground rent rises in line with RPI, being the first property developer to openly admit to using these onerous clauses.
But Which? says that this is too little too late for some homeowners who have had to put their lives on hold while being trapped in unsellable properties. Indeed, in an attempt to avoid paying ground rent, some home owners had asked to purchase their freehold upfront.
Some leaseholders told Which? they had been discouraged by sales staff or solicitors at the time of buying the property, being advised to wait a couple of years only to find later that the freehold had been sold to a third party company with an interest in extracting ever increasing fees, without the home owner’s prior knowledge.
Taylor Wimpey aren’t the only developers selling on the freehold, however. Which? also received complaints from home owners whose freeholds had been sold on by Barratt, Bellway, Persimmon and Redrow.
While this is permissible and common practice amongst property developers, the lack of transparency has left home owners feeling powerless and duped as property developers and third party companies pocket a profit.
The investigation also reveals that one home owner was quoted £13,000 to buy their freehold after it had been sold without notice, despite being told previously it would cost around £5,000 and there were examples of home owners being slapped with unreasonable ‘permission fees’ from third-party freeholders to make improvements to their own homes.
Which? received complaints from home owners who’d been forced to pay as much as £2,500 to build a conservatory, £252 to own a pet, £60 to put up a doorbell, £300 to erect a fence and £108 just to make a request to alter their property.
One Which? reader who was unaware of such clauses in her lease said she was threatened with repossession of her property after she built an extension in 2012 and the threat was only lifted after she agreed to retrospectively pay a £1,600 fee.
Previously reserved for flats, a trend for selling new build houses on a leasehold basis has emerged in recent years. It is estimated that there are now some four million leasehold properties in England alone.
Sometimes people were not even made aware that the house was leasehold at the point of purchasing. In a separate Which? Home Movers survey, one in 10 respondents claimed they were not properly informed they were buying a leasehold property when they bought it and many more may still be in the dark.
Last year, the Government promised to crackdown on unfair leasehold practices by banning the sale of almost all leasehold new build houses and making it cheaper for existing leaseholders to buy their freehold.
‘We found families facing onerous clauses from developers, being badly advised by lawyers and hit with spiralling ground rents that effectively rendered their homes unsellable,’ said Gareth Shaw, Which? money expert.
‘In some cases they were ordered to pay extortionate retrospective permission fees under threat of losing their home. We look forward to seeing firm action from the Government to protect home owners and ensure that no-one loses out as result of these unfair practices in the future,’ he added.
