For many new build property owners over the past decade, instead of moving into the idyllic tranquil setting after signing the final jargon filled documents, receiving the keys and parking the moving wagon alongside their slick, gleaming, flawless home, they have been confronted with an horrific realization that they are trapped in an escalating leasehold nightmare.
The leasehold sector has been through a lot over the past 12 months and, at least for all buyers entering the market, legislative changes have increased consumer protections.
Sadly, for those in established leasehold contracts, the road to receiving fair contractual conditions will continue moving a lot slower.
Last year, the National Association of Estate Agents Propertymark report, found that 94% of leaseholders regret their buying decision with many feeling destroyed by the lack of transparency and intentional mis-selling of the leasehold title.
Almost half (42%) were persuaded with ambiguous and confusing language whilst over half (57%) purchased their property without being clearly informed about the implications of buying a leasehold property.
During a thematic review of law firms, the Solicitors Regulation Authority (SRA) found that almost a quarter (23%) of solicitors failed to fully inform their purchasers about the conditions within their leasehold contracts, leading many to question the quality of information being provided to potential buyers.
This has led to many being forced to pay crippling ground rents which double every decade and unreasonable additional costs that are causing the property to become unsaleable to lenders.
A Select Committee Report, completed by the Ministry of Housing, Communities and Local Government condemned the leasehold system that allowed freeholders to accrue huge profits without providing a service beneficial to the leasehold owner.
One of the main criticisms involved the relationship between developer and solicitor. The committee report suggested that, in the majority of cases, a buyer was coerced or pressured into using legal representatives suggested by the developer.
As 78% of leaseholders bought their properties directly from the developer, without using an estate agent, it has been suggested that many were not informed of their right to choose independent representation that could offer impartial and independent advice.
In response to the criticism and concerns, 40 house builders and developers signed up to a voluntary 14-point pledge in March designed to end the practice of onerous and unfair leasehold contracts. Amongst other promises, the pledge asked developers to review current ground rent agreements to make them less onerous, eradicate doubling ground rent for periods of time less than 20 years and standardise the upfront information offered to leaseholders prior to completion.
Whilst it was hoped that the pledge would help the 12,000 plus people in leasehold owned property, the Government has also responded with compulsory legislation which will significantly help future leasehold owners.
All new build houses will now need to be sold as freehold property except in exceptional circumstances; no developers selling homes using Help to buy, including flats and apartments, are allowed to include leasehold property; all ground rents are capped at a peppercorn zero benefit value and requests for information must be provided within 15 days at a cost of no more than £200 to the consumer.
The Law Commission also looked at traditional leasehold conditions for those living in shared Freeholder owned buildings. Commonhold property was cited as a way of increasing the powers of leaseholders in shared spaces.
Commonhold ownership allows a person to own a freehold property in a shared building. The freeholder will also become a shared owner in the shared areas – in a flat, this will mean the common areas and corridors as well as the structure of the building. This would then mean that service charges applied to the building’s owner, will be replaced with a democratic contribution agreed by all Commonhold owners.
Although the casualties of leasehold homes continue to increase and will suffer for some time to come, onerous conditions are coming to an end and future new build property owners can finally park up their moving truck and begin their adventure without the shackles of leasehold contracts weighing them down.