Leasehold property is popular in England, particularly in inner cities, which are densely populated with apartment blocks. However, in recent months it has come to light that property developers are writing in sneaky clauses to contracts allowing ground rent to rise exponentially, sometimes in excess of £10,000 per year! Subsequently, could this be the end of an era for leasehold?
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it.
Leasehold scandal – proposed crackdown
The way the leasehold system works is that leaseholders pay a ground rent to the freeholder each year until their lease is up, or they apply to extend it. The leaseholder also may have to pay the freeholder if they wish to make signifiant changes to their property.
Clauses that have been executed by property developers and freeholders have now come to light by property officials as scandalous.
So much so that are considering hefty action in the form of an outright ban on leaseholds for new-build property!
Some examples from the Department for Communities and Local Government (DCLG) of scandals include:
- Ground rent set to double each decade, meaning by 2060 it would be £10,000 per year
- A small change to the family home costing £1,500, payable to the freeholder
- A £40,000 bill to the homeowner to buy the lease, when it was communicated it would be £2,000
Take action and protect yourself
There is to be a public consultation on this matter in the coming weeks where officials will make a decision on how to proceed.
In the meantime it is important to know where you stand.
Buyers:
- Check and double check any leasehold agreement and ensure you take professional advice
- Even if you have found your dream home, carefully consider before buying, the consequences of a clause of this nature in your contract.
- Some lenders will not offer mortgages on properties with unreasonable increases in costs. If you do decide to proceed and need help finding a mortgage, contact our mortgage adviser, Chris, who can discuss your options.
Leaseholders:
- Ensure you fully understand your costs for making property amends. Seek legal advice if necessary to clarify your position
- Revisit your lease agreement and consider your options if you find a clause that previously went unnoticed.
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