Thousands of new-build buyers were ‘mis-sold’ leasehold homes
94 per cent of leasehold homeowners regret buying and two-thirds believe they were mis-sold their property
THE vast majority of homeowners who bought a leasehold house now regret it, while many feel they were mis-sold and some are struggling to sell up, a report has found.
Leasehold house owners can find themselves paying ground rent as well as other fees to make changes to their homes.
Research from NAEA Propertymark found that leaseholders paid an average of £277 per year in ground rent when they moved in, and are currently paying an average of £319, with most having been in their properties for three or four years.
But the charges don't stop there. NAEA Propertymark said freeholders typically charge leasehold homeowners £1,422 to install double glazing, £887 to change the kitchen units, and £689 to replace the flooring.
Some faced bills of £527 for changing their blinds and £411 for installing a new front door.
The research also found that more than half (57 per cent) of the owners it surveyed did not realise what being a leaseholder meant until they had bought the property.
What happens when you take out a leasehold
OWNING a leasehold on a property means that you have the right to live in the property for a set period of time.
In the UK the standard amount of time is 125 years.
Buying a property leasehold means you are essentially a tenant in your own home.
It can make it more difficult to sell on the property, particularly if the lease isn't very long.
It can also mean that your house is worth less.
You may have to ask the permission of the person who fully owns the property (the freeholder) before making changes such as adding an extension or owning a pet.
It also means that any upkeep of a shared area, including the exterior walls and the roof, is the responsibility of the freeholder, so you won't have to pay for any repairs in those areas.
Some 94 per cent regret buying a leasehold and 62 per cent feel they were mis-sold.
The NAEA estimates that this equates to thousands of people who believe they were mis-sold. But it's impossible to pinpoint the exact number as there are no nationwide figures on the number of new builds that are sold leasehold.
More than three-quarters (78 per cent) had bought their home directly from developers and nearly half (48 per cent) were first-time buyers.
Of those currently trying to sell their home, a third (31 per cent) said they were struggling to attract a buyer because they do not own the freehold and a quarter (25 per cent) said house hunters who were interested were put off when they found out it was a leasehold home.
Mark Hayward, chief executive at NAEA Propertymark said: "Most buyers have no idea about the trappings of a leasehold contract until it's too late."
What if I want to buy a leasehold, what should I look out for?
ANDREW Johnson, money expert at Money Advice Service has some tips on what to consider before buying a leasehold.
- Check how many years are left on the lease. You may struggle to get a mortgage on a leasehold property which has less than 70 years to run. A short lease will be a lot more expensive to extend.
- Ask about the cost of extending your lease now if this might be an issue in the future. You don’t want anything that could impact your property's saleability in the future.
- Ask how much the ground rent is. This may be a relatively small amount now but beware escalating ground rents which have seen substantial figures payable at the end of the term of the lease. This could negatively impact your ability to sell your property in the future.
- Ask about service charges and other related costs. This generally covers repairs or maintenance to the property including buildings insurance. This can be several hundred or several thousand pounds, so consider how you will budget for these costs and the impact of any future increases.
The government has been working to make it cheaper and easier for existing leaseholders to buy out their freehold.
In July, communities secretary James Brokenshire announced new housing measures for England. He said: "We have seen leaseholders in new-build homes facing unexpected costs rising every year that bear no relation to services and that's not fair.
"So from now on any new Government funding scheme will contain the condition that the money cannot support the unjustified use of leasehold for new homes."
A Ministry of Housing, Communities and Local Government spokesman said: "It's unacceptable for home buyers to be exploited through unfair and abusive practices within the leasehold system, and the findings in the Propertymark report underline our position that real action is needed.
"This is why we have already announced measures that include a ban on leaseholds for almost all new-build houses and restricting ground rents to a peppercorn.
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The government is also working with the Law Commission to support the 1.4 million homeowners who are trapped in rip-off leasehold homes.
Before buying a house, you should always check whether it is leasehold or freehold.
New laws protecting people from unfair leaseholds are expected this year.
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