New Builds, the Leasehold Trap and the future
05 July 2018
Recently built leasehold homes over the last decade have been left unsaleable as owners have been asked to pay substantial sums to buy the freeholds.
Previous scandals have meant that some leasehold home owners have been forced to pay over £30,000 to buy the freehold on their recently built homes, despite its long lease.
The trap for leasehold owners comes from the growth in ground rent in the long leases. At first the new builds seem affordable. The developers lease the property for a term of 999 years. The rent starts to double up over the years and the buyers are then forced to buy the Freehold for a large sum.
Previously when properties had long leases of 999 the ground rent on them was a nominal rent which would amount to a few £ every year but with recent new builds the ground rent is doubling and this is not explained to the buyers who could end up paying thousands every year. Furthermore home owners are forced to pay the Freeholders monies if they want to change their mortgage on the property, this all amounts to unnecessary cost that is not explained to buyers when they enter the initial lease. It just adds further cost to new home owners who are already stretched. The freeholders are simply creating a revenue and cost should only be for maintenance and not to make profit from the leaseholders.
Given the circumstances the government has proposed a total ban on all new build properties to have long leaseholds and introduce measures that ground rent on all new houses and flats are set to zero. The government will also provide leaseholders with clear support on the various routes available to them.
The government has stated that it will work with the Law also said it would work with the Law Commission to make the process of purchasing a freehold or extending a lease easier and cheaper. The Communities and Local Government Department confirmed that new legislation would be introduced as soon as possible subject to the availability of parliamentary time.
If you have any queries regarding a leasehold, contact us today on 01254 297130 to speak to one of our specialist solicitors.