Property owners warned not to fall into leasehold trap

Louie Burns, managing director of Leasehold Solutions
Louie Burns, managing director of Leasehold Solutions
Promoted by Leasehold Solutions

UK’s leading enfranchisement specialist decries government action as ‘incredibly weak’ and urges leaseholders to know their rights

Leaseholders are being urged to know their rights and defend themselves against ‘underhand tactics’.

In the wake of the leasehold scandal, Leasehold Solutions is holding a public information event in Leeds on February 27 to allow homeowners to ‘take back control’.

The company has long been an outspoken advocate for leaseholder rights and has criticised the government for failing to act strongly enough.

Managing director Louie Burns said: "Leasehold is a complex area and it can be very difficult for owners of flats and leasehold houses to get access to the information they need to defend themselves.

“That's why we're bringing the Leasehold Roadshow to Leeds, to provide these property owners with free, impartial legal and valuation advice to help them take back control of their property.”

“We see many cases where flat owners get exploited by unscrupulous freeholders, who raise their ground rent and service charges, or offer them informal lease extensions, where flat owners end up with no legal protection whatsoever,” said Mr Burns.

“The only way flat owners can defend themselves against these underhand tactics, and spend less money in the process, is to fully understand their rights as leaseholders.”

Leasehold scandal

The leasehold scandal hit the headlines last summer as campaigners said around 100,000 people were trapped in contracts with developers and facing spiralling costs.

While leasehold properties have existed for centuries, the problem escalated when developers started to insert clauses with far higher ground rents than in the past which also double every 10 years.

This means leaseholders, often first-time buyers, could be left with costs spiralling to unmanageable levels and unsellable properties.

In July 2017 the government announced a consultation on plans to ban the sale of new leasehold homes and scrap ground rents. In December, a series of measures were announced to ‘cut out unfair and abusive practices’.

They included a ban on ‘almost all’ new build houses and changes to ensure ground rents on new long leases, for both houses and flats, are set to zero.

Speaking at the time, communities secretary Sajid Javid said: “It’s unacceptable for home buyers to be exploited through unnecessary leaseholds, unjustifiable charges and onerous ground rent terms.

“That’s why the measures this government is now putting in place will help create a system that actually works for consumers.”

However, the final measures announced were described as ‘incredibly weak’ by Leasehold Solutions.

“Of course, we would welcome any reforms that actually make the leasehold system fairer for the millions of homeowners in England and Wales caught in the web of paying extortionate ground rents, onerous service charges and lease extensions,” said Mr Burns.

“However, the measures announced by the government are incredibly weak.

“While the offer to abolish ground rents for new leases seems an attractive offer, it actually leaves existing leaseholders in a worse position because it will create a two-tier market, making new build properties with zero ground rents more attractive, and leaving existing leaseholders with less chance to sell their homes, as ground rents will still apply to their properties.

“Essentially developers have got off scot-free and, as usual, existing leaseholders will suffer the harshest consequences.”

Forgotten casualties

Mr Burns has also called on the government to rescue the ‘forgotten casualties’ of the doubling ground rent scandal by tackling ‘informal’ lease extensions already undertaken for by some leasehold owners.

“The implications of doubling ground rents from informal deals on leasehold flats are a huge scandal on a much greater scale than leasehold houses,” he said.

“However, the scandal of informal deals has received virtually no media nor political attention and many flat owners remain completely unaware of the trap they are falling into.

“Hundreds of thousands of flat owners in England and Wales have already been affected.

“I estimate up to 50 per cent of all lease extensions carried out over the past 25 years have been via informal deals.”

Owners of leasehold flats have a legal right to extend their lease by an additional 90 years and to reduce the ground rent to zero.

Once the extension is complete, this strips out any future income from ground rents and lease extensions for the freeholder. Therefore, to protect their future income, freeholders often offer leaseholders ‘informal’ deals. However, these often only extend the lease to 99 or 125 years rather than by 90 years.

“Worse still, they often include onerous ground rents which can be £500 per year linked to an aggressive accelerator, for example doubling every 10 years,” said Mr Burns.

“This is evil genius by freeholders, as in less than 20 years the flat owner will once again need to extend their lease, except that then the onerous ground rent means the flat owner agreed in the informal deal will have to pay considerably more for the extension.”

Get informed

Mr Burns is urging anyone who has concerns about their leasehold – whether it is a new build home or flat – to attend the public information event in Leeds.

To register visit http://bit.ly/2DBDQk9.

The Leasehold Roadshow will be held at Leeds Mercure from 10am to 6pm on Tuesday, February 27.

It will include one-to-one sessions and seminars designed to inform leaseholders about their rights.