Our writer says that people living in leasehold homes can’t wait – they need help now
We need immediate Government action on the current leasehold scandal.
It cannot wait – people have bought homes that they cannot sell, that they cannot upgrade without paying for the privilege, and that they cannot feel that they truly own.
That’s been highlighted by the work of several excellent journalists and campaigners, but a new report really shines a light on just how bad it has been.
NAEA Propertymark surveyed more than 1,000 people who have bought homes on a leasehold rather than freehold basis and what it has found is shocking.
Almost half of those who bought leasehold houses in the last 10 years did not realise they were only buying a leasehold until it was too late. Almost half!
That’s an issue made even more concerning by the fact 65% of people used the solicitor that their housebuilder recommended.
Now read: The questions you must ask before buying a property
Almost 60% of the people questioned said they didn’t understand what being a leaseholder meant until they had bought the property and almost half were unaware of the escalating ground rent until it was too late.
So it’s unsurprising that 94% of the 1,000 homeowners questioned said they regret buying a leasehold. And two-thirds said they feel like they were mis-sold their homes.
This is a horrendous situation. Homes are not just financial decisions, not just investments or assets. They are intensely emotional things, we all define ourselves in part by where we live.
If you’ve scraped together a deposit in order to buy your home then it’s hard to imagine the distress you’d feel to discover you don’t own it.
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How bad is it?
When someone buys a leasehold property, they own the home but not the land on which it stands. Typically, that means they pay a ground rent to the leaseholder and also a service charge for the upkeep of the common areas.
In the past, only flats were really sold this way. However, more recently developers have been selling houses as leasehold too, allowing them to make some extra cash by also selling the leasehold to investors who want the security leasehold offers.
That sounds bad but it gets worse. Some of these homes include doubling clauses, meaning that the ground rent can double every decade (and some buyers claim they were specifically told longer).
Which? offers the example that a £295 ground rent could reach £9,440 a year within just 50 years.
Admittedly inflation means that amount will not be as jaw-dropping then as it is now, but if it’s putting banks off from lending on these homes then clearly they believe it’s going to cause serious devaluation of these homes.
Buying a leasehold? Read this first!
And even without the doubling rent, owners are struggling to understand how they do not have full control of the brand new home they just bought.
Which? reports that owners have been charged £252 to keep pets in their own homes, one was hit with a £60 fee for changing their doorbell. Another was threatened with repossession after building a conservatory on their own property.
This is simply not acceptable for the affected buyers. We can’t just stop this from being an issue now, we need to ensure that the people who are already living in them have some protection.
The Government is acting, of course. However, I believe not quickly enough. Last autumn the Government launched a consultation on unfair practices in the leasehold market and promised “real action” to end the abuse.
Sajid Javid, then Secretary of State for Communities and Local Government, said the practices were “practically feudal and entirely unjustifiable”.
Avoid a rip-off mortgage: lock into a cheaper deal
Biggest burden for young buyers
One of the real, burning injustices of the leasehold scandal is that it’s particularly hurt younger buyers.
Various schemes designed to help them onto the property ladder have also funnelled them towards new-build homes, meaning they are disproportionately affected by this issue.
That’s an injustice against a group who’ve already had a harder struggle to make it onto the property market.
They’ve also paid a premium for a new-build, it’s often described anecdotally as around 10%.
Now read: How to help your kids buy their first home
After all that struggle and all that expense and finally walking through the door of their sparkling new home, they’ve slowly realised that their home is not truly their own.
Mark Hayward, chief executive at NAEA Propertymark said: “First-time buyers [have] accounted for 50 per cent of leasehold house sales over the last 10 years; they typically have less bargaining power in the market so often opt for newbuild sales directly from developers.
“Buying a home is a big undertaking, and one of the biggest financial and emotional investments we make.
“Those who buy a newbuild 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.
We need action now.
Next read: Homebuying extras that can cost you thousands
Can’t wait for change
Earlier this summer the secretary of state for housing James Brokenshire said that Government funding schemes would no longer help buyers with properties from developers who sell of leasehold in this way.
However, this situation is outrageous and Government support for buying new builds has helped fuel it.
We need to act now to restore faith in new builds at a time when we desperately need people to keep buying them. After all, we need developers to keep building them to help shrink the housing shortage.
We need to act now to send a clear signal that large companies cannot keep finding new ways to wring every penny out of their customers – aggressive exploitation will be tackled.
We need to act to help the property market function properly; some mortgage providers refuse to lend on affected new homes.
And we need to act now so that the people trapped in leasehold homes are no longer exploited by a situation that so many did not enter willingly.
The leasehold issue may well turn out to be one of the biggest financial scandals of our time, and that’s saying something. The Government needs to act to ensure its victims are not left out of pocket.
Now read: Opinion: these rip-off charges on leasehold and new build homes need to end
What do you think? Should the Government act now and what’s the best solution? Have your say using the comments below.