Almost all leaseholders regret their purchase
In its Leasehold: A Life Sentence? report the trade body discovered dismay over the state of leasehold among owners.
Around 93 per cent of leasehold homeowners said they definitely would not buy another leasehold property, while almost two-thirds (62 per cent) feel that they were mis-sold to.
The study found that 57 per cent of buyers did not actually understand what leasehold meant until after the purchase. Around one in ten read up on what it meant after the first viewing, but there remains four per cent of owners who still did not understand it.
The trade body argued this lack of understanding cannot be put down to simply not having gone through the process before, as almost half the leaseholders NAEA Propertymark spoke to had owned a property before.
The report comes in the same week that the Competition and Markets Authority announced it was conducting its own investigation into the leasehold sector.
Advice from independent voices
The report found that buyers who used an estate agent or their own solicitor were more likely to understand what being a leaseholder meant, buying from a more informed position.
In contrast, those who dealt directly with the developer or used a solicitor recommended by them felt lower levels of understanding throughout the process.
This is particularly problematic as only one in five buyers interacted with an estate agent in the process, with most dealing directly with the developer while two-thirds used the builder’s recommended solicitor.
The report stated: “Despite the convenience, this potentially limits the input of independent third parties who can help educate and inform buyers and make sure they are fully aware of the details of the contracts they are signing.”
Unexpected costs and charges
The report also lays bare the scale of unexpected fees that leaseholders are landed with.
On average, leaseholders paid £277 in ground rent when they moved in, and are currently paying £319 a year – a 15 per cent increase, even though most have only been in their properties for three or four years.
Furthermore, 45 per cent said they were unaware of escalating ground rent, with many saying they had been led to believe that ground rent would not change for at least the first couple of years in the property.
Almost half said they would not have bought the property if they knew ground rent was going to increase, with 36 per cent concerned about how they will afford any future increases.
Putting things right
NAEA Propertymark outlined a host of measures which it suggested would improve the market. These include:
Requiring developers to adhere to the Consumer Code for Home Builders.
Providing purchasers of new build homes with access to an ombudsman scheme.
Requiring freeholders of leasehold properties to sign up to a redress scheme.
Capping ground rents.
Introducing a digital log-book for each property that is bought and sold.
Introducing statutory regulation of the whole sector.