Leasehold property ownership in the UK has doubled in the past decade, and in London 9 out of 10 homes are in fact leasehold. Property owners have been getting greedy though with escalating ground rents and service charges that leave the home owner fighting rising costs and in some cases their home becomes unsalable due to specific leasehold clauses. Is leasehold property becoming a trap?
This does not constitute advice and advice should be sought in all instances before acting on it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
Popularity of leasehold property
According to HomeOwners Alliance, a decade ago 22% of new-builds were leasehold. This compares to 43% at present.
In the capital, 90% of new builds are no leasehold as the apartment lifestyle becomes increasingly more common.
Many of those investing in new-builds are first time buyers, as a range of size properties are available to suit their smaller budgets.
No. one concern for UK homeowners is Leasehold
HomeOwnersAlliance conduct an annual survey to UK homeowners, which now puts leasehold at the top of the list.
Last year, 42% of homeowners said that the leasehold-freehold system is a serious, or very serious issue. This percentage has increased to 50% this year.
Last year, Leasehold Knowledge Partnership unveiled how certain big-player property developers were introducing clauses to 999 year leases that allowed ground rent to double every 10 years.
Not only does this mean exponentially increased costs if you plan to remain in your property, but also for those wanting to sell, the property becomes an unattractive option when a buyer considers their associated costs.
In addition, some mortgage companies refused to lend to a buyer seeking a property with such ground rent clauses.
This can leave both buyers and sellers in a nightmare situation, trapped and unable to move.
Increase in service charges
The ground rent isn’t the only concern. Property management companies continue to increase service charges without justification of the cause for an increase.
Also, extending existing leases is another vulnerable area where the reins are in the hands of the property owners, not the leaseholders.
What is being done about it?
HomeOwnersAlliance is campaigning that new leasehold projects are halted and that property developers switch to a system that is similar to the US condominium. Here freehold is allocated to each individual property owner, which results in a shared responsibility for the maintenance of the building or land.
This was introduced in 2002 in the UK, however results have been a huge disappointment, according to Paula Higgins, the chief executive of the HomeOwners Alliance.
Campaigners and home owners report that the seriousness of the situation continues and the government are not putting enough importance on finding a solution.
Mortgage lenders could have a critical part to play, as many lending policies state that the ground rent needs to be no more than a certain percentage of the value of the property.
For example, Nationwide informed property developers that they would no longer lend money on new build properties, with a ground rent of more than 0.1% of the home value, or on leases shorter than 125 years.
Do you have a leasehold situation like this where you are unable to find a suitable mortgage?
Need help to find a mortgage on a leasehold property?
If you are struggling to find a leasehold mortgage due to unusual class, speak to our specialist mortgage advisor, Chris, who can look into your options.
Tel: 01403 780 770
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