Are you planning to build your next property development to be sold as a leasehold or freehold?
The Communities Secretary, Sajid Javid, has just announced plans to tackle what is becoming more and more of an issue.
Leaseholds are mostly used with flats and generally vary in length from 99 to 999 years though more than a million houses are owned on a leasehold basis.
Javid is quoted as saying “Enough is enough. These practices are unjust, unnecessary and need to stop.”
There has been news coverage recently, notably involving Taylor Wimpey who have set aside £130m to cover ground rent disputes, which suggests those buying leaseholds have been taken advantage of and many are unaware of what they are actually buying.
A BBC article talks to a new build owner who has described her purchase as the biggest mistake she’s ever made. Bellway, who were the house builder, sold the freehold to a third party investment company. The owner of the home says she has been asked for £13,300 to buy the freehold her house sits on. Others are finding they need to pay significant sums to make minor changes to their house.
This practice is not illegal though MP’s have likened this “national scandal” to the mis-selling of insurance, dubbing it the house builders PPI.
The new proposals will look at leases drawn up in the future to be fairer by making them relate to the real costs involved. They hope it will avoid unfair treatment of home owners that in one case was shown to have paid £40,000 for the land their house is on while another house will have ground rent costing £10,000 a year by 2060.
Sir Peter Bottomley, co chair of the cross party parliamentary group on leasehold reform, also believes that work must be done to help those who have already bought houses that can become “essentially unsaleable.”
His opinion is that some unethical builders are using it as a money grabbing scheme that is becoming top of the list of house holders’ worries.
Some ground rents are linked to the value of the property, so they can grow quickly, significantly and are g worry for those that think it will hamper the sale of their existing
This issue was part of the Tories election manifesto which Javid says will mean home buyers can be confident a dream home won’t turn into a nightmare. It’s not a “clever business model, it’s an extortion racket.”