new build houses

IS THERE GOOD NEWS FOR EXISTING LEASEHOLDERS?

Mark Hayward appeared on BBC Breakfast in July to discuss leaseholds and our findings on the matter with Business reporter Steph McGovern.

The financial consequences were dire

The piece included a film of Jo Derbyshire, who described the process that she went through on buying her property. She was told that it was leasehold, that the ground rent would be £295 per year and that the cost would double every ten years. But crucially she says that she didn’t understand what leasehold really was and what the consequences could be.

Her leasehold was sold on to an offshore investor just 11 months later “and the financial consequences of that were dire”.

“At that moment, when I had that penny drop moment that not only do I not own the ground that the house is built on, but I don’t actually own the house, I felt physically sick”

“for me [leasehold] has sucked all of the joy out of having this beautiful house, because it’s not mine, not one single brick of it.”

Ms Derbyshire went on to explain that the conveyancer was recommended by the developer and did not explain that it was common practice for leases to be sold on.

Leasehold: A Life Sentence?

Back in the studio, Mark Hayward discussed the findings of Leasehold: a life sentence?, research commissioned by NAEA Propertymark last year and conducted with over 1000 homeowners living in leasehold houses.

Mark explained that while leasehold is common, the issue is with new build houses, of which there are thousands. Our research showed 65% used a conveyancer recommended by the developer with 57% of buyers saying that they did not understand what leasehold was until they had completed the purchase.

The freeholder owns the property and can do what they want with it. The buyer is occupying, but effectively renting, the property for a period of time. Developers are selling the freeholds on, almost immediately, and making a profit.

Mark went on to say that ground rent is a principle that many people understand, but buried in the small print is the detail that the ground rent is escalating every 5 or 10 years, and that then becomes an affordability issue. Lenders are discouraged from lending, leaving owners wishing to leave trapped in the property.

Labour consultation launched

In a number of announcements going back several years, Government has said they are banning leasehold on new build properties. Labour have now launched a consultation, saying that they don’t want anyone trapped in leasehold properties. However tackling this is a huge issue because freeholds have been sold on, many to offshore investors. Unpicking who now owns the freehold many times over is highly complex and very expensive, however, Government have instructed the Competition and Markets Authority (CMA) to investigate.

According to Mark Hayward “The CMA has teeth. Is it misselling? Well, our research shows a large number of people who say that they weren’t aware. People buy with their hearts and are they understanding all of the paperwork they need to go through?”

What should existing leaseholders do?

Mark Hayward’s advice to existing leaseholders:

  • Find out the real terms of your lease, preferably by going back to the original conveyancer that you used.
  • Go through the small print to understand exactly what the facts are in your case.
  • Contact an action group that are local to you. There are many of them about and they will help you to understand the regional picture.

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