The National Association of Estate Agents says 94% of leasehold home buyers regret their decision – and 65% used the developers’ stooge solicitors in buying these flawed products.
Many have been sold leasehold houses by plc house builders for whom leasehold tenure “can be a highly successful cash cow”.
The leaseholders echo the sentiments of Justin Madders MP that they were mis-sold their properties and that leasehold properties with onerous ground rents are the “PPI of the property sector”. 62% of them feel that they were mis-sold
The NAEA has no doubt why developers choose to sell homes – many bought with taxpayer loans through Help To Buy – as:
“They allow them to sell properties at attractive prices but continue to generate revenue through ongoing ground rents and charge residents for changes to properties and ongoing service charges. And this is the cause of significant frustration among those who have purchased a leasehold house in the last 10 years.”
Scandal brews over leasehold houses
The sale of leaseholds on houses could be the next mis-selling scandal, the professional body for estate agents has warned, as thousands of homeowners stuck with properties they cannot sell face increasing ground rent payments. Nearly half, 45 per cent, of people who bought a leasehold house in the
House owners rue leasehold purchases
Almost half the people who bought a leasehold house in the past decade had no idea what they were getting into, according to a new study. Homebuyers faced high fees and charges, with many feeling they were mis-sold. The research follows controversy which led the government to crackdown on “unjustified” leasehold houses.
The NAEA report echoes that of LKP’s survey of 2,800 leaseholders last year which found there was a direct correlation between feelings of dissatisfaction among leaseholders and those who had used the developer recommended – in the case of Countryside Properties plc, the developer “approved” – solicitor.
Particular legal firms were tasked with transacting these sales, and not one of them alerted buyers to ground rent terms or other clauses in the developer / freeholder friendly leases that would impact on values.
LKP and Nationwide reckon that there are 100,000 blighted homes as a result of these practices, and every day LKP and the National Leasehold Campaign Facebook group are contacted by leaseholders whose sales have fallen through.
Today’s report from the estate agents points out that 78% of purchasers used the house builders sales process and 65% used the developers’ stooge solicitors.
The average purchase price of a leasehold house over the past 10 years was £188,799, according to the NAEA.
The NAEA takes up LKP’s repeated interventions when faced with thoroughly misleading marketing terms like “virtual freehold”.
“The language used in the contracts is of significant concern.
“They often [in fact in the marketing material only] include the term ‘virtual freehold’, a leasehold length far beyond the norm, often several hundred years up to a maximum of 999 years, giving buyers the perception of total ownership, control and stability.
“But, it is anything but.
“Reflecting on the contract they were given by their housebuilder, two in five (42%) leaseholders say the phrase ‘virtual freehold’ was used.
“A quarter (24%) say the phrase was not explained to them by their housebuilder or solicitor and one in 10 (11%) were told it would be the same as being a freeholder.
“Buyers were assured they would have the same rights and responsibilities as a freeholder or have all the freedoms associated with being a freeholder, but this is not the case.”
The NAEA’s report is thorough, but the most interesting insight that it could provided later is data on leasehold resales, and the number of sales falling through.
“Of those selling right now, six in 10 (60%) are struggling because the property is a leasehold and not a freehold, while half (51%) say the property being a leasehold is putting off potential buyers.
“It is not only those who are actively selling who experience uncertainty and worry about not selling.
“Of those considering moving, an even larger proportion – three quarters (76%) – are worried they will not be able to find a buyer.”
Extent of leasehold house scandal revealed
Thousands of Brits are trapped in leasehold houses, faced with escalating bills, lack of power and huge regret in purchasing their properties, according to estate agency research. The majority (94%) of people who bought leasehold houses regret their decision, but for many, they were unaware they weren’t buying a freehold property, leading to 62% saying they felt they had been mis-sold.
Half of leasehold house owners didn’t know they were only buying the lease
More than half of homeowners who bought a leasehold house in the past 10 years did not realise that they were only buying a lease, new research has found. NAEA Propertymark surveyed more than 1,000 people who had bought a leasehold house and found that 94 per cent now regret their decision and 62 per cent believe it was mis-sold.
Government urged to legislate to protect home owners from ‘spider’s web of leasehold’
The Government is being urged to legislate to support leasehold home owners rather than leaving them to rely on legal action. Louie Burns, of Leasehold Solutions – which advises on extending leases and buying freeholds – called on the Government to tackle abuse in the sector, rather than leaving individuals to do it themselves.
Full report is here: propertymark-leasehold-report
Related posts:
Estate agents say extortionate charges are blighting the lives of 10% of leaseholders
Guardian sticks with new-build ground rent scandal, while LKP advises Persimmon home buyers to walk away
Dear Jeffrey Fairburn … Can I buy the freehold to a Persimmon house before you sell it to anonymous investors, please?
Buyer pulls out of Persimmon £219,995 leasehold house purchase
Mass email dump: leasehold home owners demand their freeholds after Persimmon caves into court action
Don’t buy leasehold, says Merryn Somerset Webb of Money Week, but …
Strangely the HBF. ( House Builders Federation) in their latest news bulletin state that Help to Buy is an unmitigated success..
They must mean success in lining the pockets of Developers.
Is this Government ever going to act.?
Michael,
I agree with you and have seen the success in lining pockets recently and see below:
Over the past 12 months Britain’s Top Housebuilders cashed in £300million worth of shares.
Berkeley Group’s – founder and chairman sold £65million of shares in the last 12 months, while the CE cashed in £37million.
Redrow – founder and chairman sold shares worth £76million in September last year. His charity, to which he gave away more than £200million in shares, sold £76million.
Countryside Properties – chief recently sold nearly £6million of shares, following a sale in May by the firm’s Urban Regeneration arm in the South of England of shares worth £11million.
Barratt Developments – Chief Operating Officer sold shares worth £3.3million.
Taylor Wimpey – Chief Executive sold £1.5million, with the chairman partner, selling £1.1million, and an executive £1.5million.
Persimmon – awarded shares worth more than £700million to a group of executives and senior managers. This included £75million to the Chief Executive who retained the shares. Persimmon half-year results are said to show revenues in the first half of 2018 as £1.84 Billion pounds.
Government has helped put money in the pockets of the already rich?
Michael, err,…. Not this parliament.
Far too consumed with internal fights and Brexit for one.
Secondly, does anyone seriously think this government is going to usurp the titled gentry (Cadogan Estate, Grosvenor Estate, Portman Estate, Howard de Walden Estate), the city investors, housing developers and the retirement developer donators out of its feudal income streams?
These leeches have been drawing income off the people of Great Britain for centuries with this feudal nonsense. Now there isn’t any global empire left to usurp wealth, it is now solely directed at the hard working “subjects” of this country. The government aren’t bothered about this, it will all be smoke and mirrors to allow it to continue. Even the Law Commissions cites there is too much complexity in lease contracts to legislate. That`s why the OFT had to make gentlemen s agreements on onerous “event “clauses in 2013, rather than legislate. It also meant that leaseholders could not use the courts to get their money back for the onerous charges. Nice one!
I suggest if the market is too complex, then the fix is simple. Copy Scotland and ban leasehold in its entirety.
The only heroes to come out of this at the moment are the CML. It`s true they may well be protecting their income streams as regards to mortgages further down the line by not lending on ground rents over 0.1% of property value. But its forcing the agenda and will any government have any choice in the matter long term when so much of its housing stock is frozen, like this?
What has the government been doing in the last few years? Has it been asleep? It makes these mealy mouthed statements about the success of Help to Buy while in reality it has been providing tax payers money to set up feudal income streams for developers. Shameful.
Very true. Do England and Wales want to be similar to places like Brazil or Pakistan in this regard, where a few exploit the many ? David Cameron mentioned his big society vision in 2010 which failed to materialise. The people voted for Brexit, and other parts of Europe are rejecting traditional politics because the current system and economics do not work for them. Leasehold in England and Wales is a dirty stain on our democracy and legal system, and has no place in the 21st century. I am in the south of Italy at the moment, and the local mafia would have been proud to have devised such a system of legal extortion.
Chris, The solution to domestic leasehold has always been abolition, But government is inherently corrupt (I choose my words carefully), and is once more demonstrating this with it’s reform remit to the Law Commission – reform is the desired outcome of the moral criminals who benefit from the continued existence of domestic leasehold. And successive governments have been the great enablers
I’m a Leaseholder (35 years) and I also bought the Freehold 25 years ago : The other Leaseholder is ‘Buy-To-let’ and the sub-Tenants are a nuisance.
Why should I sell the Freehold share at a discount ?
I can’t buy meat fish poultry fruit and veg at the supermarket at half price.
I want to buy a Vermeer at half price : any offers?
Anyone got a new Mercedes at half price and I want a Barbados holiday half price with free drinks.
Commonhold doesn’t make the slightest difference : the building will still suffer wear and tear and will still need repairs and insurance and the Leaseholders will still moan and complain until the cows come home about the cost of a tin of paint and the battery for a doorbell.
Leaseholders with Sky and the latest smartphones will moan and complain about
Insurance renewals and professional fees and then lose at the Tribunal because they
didn’t read the Lease that they signed.
URGENT….URGENT…URGENT
PLEASE,, complete the Law COMMISSIONS survey on Lease Enfranchisement on line (deadline November 18).
We need to get as much support for leaseholders as possible and highlight our opinions & experiences, so that we stand any chance for the Government to impliment change or improvement for leaseholders.
Thank you.