Traditionally, houses are sold as freehold, with leasehold contracts limited to properties with communal areas, like flats or apartments. Over the last 15-20 years, however, there has been an increasing trend of housing developers selling new-build houses on a leasehold, rather than freehold, basis.
Instead of owning their house and the land it stands on, owners of leasehold houses agree to rent the land from the owner of the freehold and pay an annual ground rent and service charge.
Many leasehold houses are part of the government’s help-to-buy scheme, so are particularly attractive to young first-time buyers. Unfortunately, the terms of these leases can contain onerous clauses that can have serious financial implications for homeowners.
The ground rent scandal
Most commonly, homeowners are refquired to pay excessive ground rents which increase over time. Under the terms of some leases, ground rents double every 10 years.
On the face of it, this increase might not seem like much. However, the ground rent of a property that started at £250, will, over 50 years, rise to as much as £8000. In the press, the emergence of this unscrupulous practice has been referred to as the ground rent scandal.
Some homeowners buy their property with the intention of saving up and eventually buying its freehold. At the time of purchase, they may be told this will be possible or even quoted a price for doing so.
However, unknowingly to the homeowner, the terms of some leases state that if the freehold is not purchased within a specific period, its price will escalate. Unfortunately, many homeowners only find out about these clauses when it is too late.
When they approach their developer later down the line and ask to buy the freehold, some people discover that it has been sold on to an investor, who is quoting a much greater price and reaping the rewards of doubling ground rent clauses. The homeowner can no longer afford to buy the freehold of their home.
Families up and down the country are feeling the brunt of these contract clauses and some are being held at ransom by the freeholder of their property. Lease terms are negatively impacting their property’s value and making it difficult for them to sell their home when it comes time to move on.
Mortgage providers are also refusing to lend to prospective buyers. This is because the lease terms of these properties are likely to reduce the value of their security for the mortgage.
Who is responsible?
During the purchase process, your conveyancing solicitor should have warned you about the financial implications of the ground rent terms when advising you on the lease of your home.
Because the terms of the lease may materially affect a property’s value, if you took out a mortgage, your solicitor should also have reported any increase in ground rent to your mortgage lender.
Your conveyancer should also have advised you of the possibility that the price of the freehold will escalate after a certain period. They should have made clear the potential consequences for you and your family.
If they failed to advise you or your lender about either the terms of your property’s lease or freehold during the conveyancing process, they may have caused you to experience considerable financial loss. This is an example of professional negligence.
If you have suffered as a result of escalating ground rent charges and the freehold of your property now feels completely out of reach, you are likely to have grounds to take legal action.
How Jefferies Solicitors can help with your mis-sold leasehold claim
If you received negligent advice from your conveyancing solicitor and this caused you financial loss or impacted the saleability of your home, you are entitled to hold them to account.
If you have fallen victim to the ground rent scandal or are desperate to secure your property’s freehold, contact the team at Jefferies today. During a free, no-obligation conversation, we will be able to discuss with you the circumstances of your potential mis-sold leasehold claim.