Report reveals misselling scandal of leasehold houses in Britain

Almost half of British people who bought leasehold houses in the last 10 years didn’t know they were not buying the freehold until it was too late, a new piece of research has found.

Some 65% used the solicitor the house builder recommended and of those 15% were never told they wouldn’t own the freehold and now, a third of those trying to sell up are struggling because they don’t own the freehold, and two thirds feel like they were missold.

The report from the National Association of Estate Agents reveals that thousands of homeowners are stuck in properties they cannot afford to continue living in and cannot sell, because they bought them as leasehold.

Many also face escalating ground rent, extortionate fees for making cosmetic alterations like changing their front door, and unable to sell their homes.

The analysis revealed that 78% of leasehold house owners bought their home directly from a developer, rather than going through an estate agent, and when it came to completing the purchase 15% had to find it in the contract themselves.

Some 45% didn’t know they were only buying the lease until it was too late and 57% didn’t understand what being a ‘leaseholder’ meant until they had already purchased the property. Some 48% were unaware of the escalating ground rent until it was too late, and as a result, the vast majority, some 94% said that they regret buying a leasehold and 62% feel like they were missold.

In most leasehold agreements, the freehold stipulates that home owners must seek permission to make cosmetic alterations, with 10% facing a charge for doing so. On average, freeholders charged home owners £1,422 to install double glazing, £887 to change the kitchen units, and £689 to replace the flooring. Some even faced bills for changing their blinds of £527and installing a new front door at £411.

Of those currently trying to sell their home 31% are struggling to attract a buyer because they don’t own the freehold and 25% have had interest from house hunters, but when they found out the property was being sold as leasehold, they were deterred.

As a result of this, 18% have actively tried to buy the freehold to make their property more attractive to prospective buyers, while 41% are thinking about doing it. The vast majority, some 93%, say they definitely wouldn’t buy another leasehold property, because of their experiences.

NAEA chief executive Mark Hayward said:

‘Buying a home is a big undertaking, and one of the biggest financial and emotional investments we make. Those who buy a new build are often under the impression that buying something brand new means it will be perfect, but unfortunately that isn’t the case and most buyers have no idea about the trappings of a leasehold contract until it’s too late.’

He pointed out that in June, the Secretary of State for Housing James Brokenshire, announced that housing developers would no longer be able to use new Government funding schemes for unjustified new leasehold house sales. ‘This is good news for future home owners, particularly first time buyers who accounted for 50% of leasehold house sales over the last 10 years as they typically have less bargaining power in the market so often opt for new build sales directly from developers. However, the challenge now is looking at what can be done to help those stuck in leases,’ Hayward explained.

In a leasehold flat or apartment, the service charge may cover maintenance of communal hallways, cleaning, and fixing things like guttering, roofs or building management. However, in leasehold houses, there are unlikely to be communal areas inside the property and instead the service charge will usually cover the maintenance of outdoor communal areas. More than half, some 51%, of those living in leasehold houses therefore feel that alongside council tax, they’re paying for same thing twice.

Hayward added:

‘If you buy a new build house, you’d usually deal directly with the developer’s sales team rather than an estate agent. But sales assistants aren’t bound by the Estate Agents Act 1979, leaving buyers vulnerable and without protection, which explains why so many feel like they were missold.

‘Almost all of the home owners we surveyed say they wouldn’t advise their friends or family to buy a leasehold home, which is a damning indictment on the industry. It’s time we listened to this and sought a robust solution for all those affected, unable to sell their homes, and serving a leasehold life sentence.’

According to Katrine Sporle, The Property Ombudsman, the findings of the report are ‘a scandal’:

‘New build homes are not currently covered by an Ombudsman which means many consumers who feel like they were missold, or are facing issues, have nowhere to go to seek redress.

‘With the Government currently looking to strengthen consumer redress in the industry, we urge them to include new homes in order to provide a better housing market for all.’

Kindly shared by Property Wire