New-Build Leasehold Homes ‘Proving Unsellable’

• June 27, 2018|
• News|
• Darren Clarke

An investigation by consumer watchdog Which? has found that homeowners of new-build leasehold properties are coming to find that their houses are unsellable when they want to move on, as well as finding themselves having to face rising fees for the likes of ground rent.

Homeowners are typically required to pay ground rent but this is usually at a fixed price for a set amount of time before increases can be pushed through. But it seems that some developers have punitive doubling clauses included in sales contracts that increase this at an alarming rate, which means people find themselves trapped in properties that they can no longer sell.

One homeowner, for example, explained that six years after buying her house she found the ground rent would double every decade instead of every 25 years, as she had been told. So between 2008 and 2058, the fees would climb from £295 to £9,440 a year – which has meant that estate agents are now refusing to put it on the market.

Unreasonable permission fees are also being asked for by third-party freeholders when homeowners want to make improvements to their own property. Complaints have been sent in to Which? by people who had to pay £2,500 to build a conservatory, £60 to install a doorbell, £252 to own a pet, £108 just to request to make changes to the house and £300 to erect a fence.

Money expert with the watchdog Gareth Shaw said: “We found families facing onerous clauses from developers, being badly advised by lawyers and hit with spiralling ground rents that effectively rendered their homes unsellable. In some cases they were ordered to pay extortionate retrospective permission fees under threat of losing their home. We look forward to seeing firm action from the government to protect homeowners and ensure that no-one loses out as result of these unfair practices in the future.”

It is possible for leaseholders to force the freeholder to sell the freehold on a flat or house via a process known as collective enfranchisement. This means you can join forces with other leaseholders to buy the freehold for a fair price. You can also pay to extend the lease but this can run into thousands of pounds, particularly if there is fewer than 80 years left on the lease.

Bear in mind, however, that a flat with a share of the freehold is different to a freehold house. If you have a flat and a share of the freehold, you own the freehold jointly with anyone else with property in that same building. Flat owners with a share of freehold will still have a lease in place and it’s possible that you could need to extend this, although this may actually be free.

Interestingly, you could add value to your flat if you do buy the freehold – and don’t forget that a short lease may well put prospective buyers off from purchasing your property if you do want to sell up and move on.

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