Toxic leaseholds are to be investigated by the Competition and Markets Authority (CMA) and it is being claimed that it could be the property world’s version of PPI in terms of mis-selling.
It is certainly good news. Who could not have felt sympathy for the stories of people being charged huge fees for wanting to change their flooring. But it is a situation that should never have been allowed to happen and the word “greed” does come to mind.
When I bought my first property it was a flat, the ground floor of an old Victorian house and it was a leasehold. Without going into too many details the landlord, to whom I paid an annual ground rent, was a rogue. There were issues with insurance and repairs to the roof.
Needless to say, when I managed to sell, only after taking the landlord to court, I vowed to never buy a leasehold property again and have never done so. But it was still a surprise to see in recent years that new houses were being sold with a leasehold.
Fortunately, I have never tried to buy a new house but if it was leasehold I would have steered clear. Unfortunately hundreds of thousands of buyers of these new leasehold properties did not.
Then the leases were sold on by the developers to management companies complete with onerous clauses which saw ground rent rising every year and fines imposed for minor changes to the property, the property that is owned by the buyer.
The CMA decision comes after years of campaigning. The Government has now banned such leases with Secretary of State for Housing, James Brokenshire calling them “exploitative and unfair” and the House of Commons Housing Committee calling on the CMA to determine if leaseholds were mis-sold.
A CMA spokesperson said that the select committee has raised serious concerns that many home owners who buy long leasehold property don’t know exactly what they are signing up to, and may be trapped in contracts with unfair terms once they move in.
“We have committed to investigating whether these homeowners are being hit with expensive fees or unfair contract terms, as well as being given all the information they need before signing on the dotted line. We will set out the full terms of this work when it begins,” the spokesperson added.
Meanwhile, it has been found that the cost of housing is now one of the main considerations when people decide whether or not to accept a job, with many being forced to live further and further away from their place of work.
Some 85% of respondents to a new housing and business survey by Strutt & Parker cited the cost of housing as important in their decision, impacting job mobility and satisfaction. Almost half of employed people, some 44%, have either not applied for a job, or not accepted one, because of high rent or house prices, while 41% have left one or more jobs because of local housing costs. A sign of the times!
It does mean that finding the right home is perhaps getting harder and even getting a mortgage is too. A friend of mine feel she has had to jump through hoops. She has two jobs, three days a week with a council and two days a week with a charity, so she works full time, but not as far as the lender is concerned.
So it is not good news that the number of first time buyer mortgages completed has fallen for the first time since September 2018, according to UK Finance figures, and the buy to let market is still in the doldrums.
According to Dilpreet Bhagrath, mortgage expert at Trussle, more needs to be done to make mortgages fairer and less of a hassle. “Getting a mortgage is often one of the biggest financial and emotional commitments a person will make in their lives, and ensuring the Government and the industry is supporting young people as they take this step is crucial,” said Bhagrath.
And if that is not enough bad news, planning approvals for new homes have fallen for the first time since 2011 with research suggesting that Brexit uncertainty is restricting finance available to developers.
Overall there was a 4% fall in planning approvals in 2018 for new housing developments, according to the research from easyMoney, which says that developers need lending to spur on new housing starts. This was a three year low with the number of residential planning approvals reaching 47,500 last year from 49,600 in 2017.
The firm believes that one of the main drivers behind the drop-off in the number of planning approvals for new homes is Brexit-related uncertainty and that this is leading to banks reducing their lending to property developers even further, forcing them to postpone new developments. It would seem that the developers have the land and the demand for homes is there, but the increasing lack of support from lenders is making it difficult to get projects moving.
Ray Clancy
Editor
