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The Snowball Effect for Leaseholders

Consumer group Which? released a damning report on new-build leaseholds and revealed that some developers include doubling ground rent clauses in sales contracts. These may be onerous if they are reviewed on a regular basis, such as every 5 to 10 years. Although the charge may sound minimal when a homeowner first takes ownership of the lease, a doubling clause may result in a considerable amount later down the line. As a result, banks may refuse to lend on such property, trapping owners in a home they cannot sell.

Doubling Ground Rent Clause

In the report, Which? interviewed a leaseholder who purchased her new-build from Taylor Wimpey. She was encouraged by the developer to use its recommended conveyancer, which confirmed that the property would be subject to a ground rent of £295 a year, a figure they stated would be reviewed every 25 years. The leaseholder later discovered that it was actually a 10-year doubling clause that started from when the term of lease commenced in 2008 rather than when she purchased her property in 2011.

The shocking discovery meant that the leaseholder will be charged nearly £9,500 a year in ground rent alone in 50 years. This would rise to £19,000 in 60 years, £38,000 in 70 years, and a whopping £76,000 per year by the end of the century. This effectively renders the property unsellable. She stated that the clause has already led two estate agents to refuse to market her home.

Another leaseholder was also improperly advised by the same conveyancer. He is now facing a similar issue of his ground rent of £250 to reach £8,000 in 50 years.

Unreasonable leasehold permission fees

On top of the excessive ground rent, many leaseholders must also pay freeholders to make any changes, whether big or small, to their properties. One homeowner revealed to Which? that her freeholder demanded £1,600 to grant permission for her to build an extension.

The report also listed excessive fees demanded by freeholders and managing agents. For example, leaseholders are demanded to pay £252 to for permission to have a pet, £300 to erect a fence, £60 to replace a doorbell and £2,500 to build a conservatory.

This is raising serious concerns about how some conveyancers have failed to properly advise buyers about their terms of sale.

Misinformed right to buy

Many leaseholders revealed to Which? that they were advised by their solicitors that they would be able to purchase the freehold by law after two years. They were even provided initial quotes to buy.

Years later, they found out that their developers had quietly sold their freeholds to investment companies without telling them. One homeowner discovered the quote to buy the freehold rose from £2,400 to £13,000. Another leaseholder was initially quoted £5,000 to buy his freehold, but the figure was tripled once the leasehold was sold without notice.

How Specters can help you

If you are a leaseholder who is paying an extortionate ground rent term and unreasonable charges, and/or was improperly advised when your purchased your property, you may be able to pursue a professional negligence claim against the conveyancer or solicitors who failed to advise you of the terms of sale when purchasing your property.

Specters Solicitors have successfully claimed compensation against conveyancers for their failure to advise upon onerous ground rent clauses. Contact us on 0300 303 3629 today for a non-obligation and complimentary telephone consultation regarding a professional negligence claim if any of the above applies to you.