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Extent of leasehold house scandal revealed

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Written by: Paloma Kubiak
07/09/2018
Thousands of Brits are trapped in leasehold houses, faced with escalating bills, lack of power and huge regret in purchasing their properties.

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.

Shocking research from NAEA Propertymark revealed that 78% of leasehold homeowners bought the property directly through a developer rather than an estate agent, meaning they have less protection.

More than half of the 1,000 leasehold house buyers (57%) surveyed, said they didn’t understand what being a ‘leaseholder’ meant until they had already bought the property. Half were first-time buyers.

And 65% were helped during the buying process by solicitors recommended by the housebuilder. As such, for 15%, they weren’t told they were not buying a freehold property. This only came to light when they thoroughly inspected their contract.

As well as lack of information during the housebuying process, the leaseholders revealed they must seek permission of the freeholder to make cosmetic alterations to the property, with 10% facing a charge for doing so.

On average, freeholders charged homeowners £1,422 to inquire about installing double glazing, £887 to change the kitchen units, and £689 to replace the flooring. Some even faced charges for the pleasure of changing the blinds (£526), and installing a new front door (£410).

Given the service charges, a third struggled to attract a buyer, while 25% said they had interest in the property until they found out it was leasehold.

As a result, 18% have actively tried to buy the freehold to make their property more attractive to prospective buyers, while 41% are thinking about doing it. An overwhelming majority (93%) said they definitely wouldn’t buy another leasehold property, because of their experiences.

Leasehold homeowners said they want the industry to help them tackle the issue, as well as being able to buy the freehold at a fair price. For others, they want to see an end to service charges while the majority want their existing leaseholds to be made ‘null and void’.

‘Completely at the mercy of the freeholder’

NAEA Propertymark chief executive, Mark Hayward, said: “Most consumers are completely unaware that buying a new build directly through a developer leaves them vulnerable and without protection, whereas buying through an estate agent at least means they will be covered by the Estate Agents Act 1979. Common practices by housing developers like referring buyers to the developer’s solicitor with ‘preferential rates’; producing jargon-filled and complicated contracts; and disguising homes as ‘virtual freehold’ have now affected too many homeowners.

“What’s worse, when a sale has completed, lots of developers pass the buck and sell the freehold to third parties within two or three years, which means the terms in the contracts homeowners sold change once they’re locked in and they’re completely at the mercy of the freeholder. It’s good progress that there are now restrictions on selling houses as leasehold, but clearly this does not help those who are already trapped in a leasehold home.”

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