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7 Sep 2018

Leasehold scandal: nine in ten buyers regret buying a leasehold house

Homeowners claim to have been mis-sold properties with onerous clauses
Row of new homes

Nine in ten leaseholders regret buying a leasehold house, and six in ten believe they may have been mis-sold by developers or their recommended solicitors.

That's according to a new report by NAEA Propertymark, which reiterates some of the findings of our investigation into the leasehold scandal in June.

The new research claims buyers are living a 'leasehold life sentence' as spiralling ground rents and permission fees make their houses unsellable.

Here, we take a look at the report's findings and explain what the government is doing to help leaseholders.

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Homeowners in the dark over leasehold terms

Research by NAEA Propertymark has cast a light on the confusion and lack of information that has surrounded many leasehold house purchases.

The report claims that almost half (45%) of more than 1,103 people surveyed didn't know they were only buying the rights to a lease until it was too late.

The report also found:

  • Nearly six in ten (57%) didn't understand what being a leaseholder meant, and nearly half (48%) were unaware of escalating ground rent clauses.
  • Nearly eight in ten (78%) bought their homes directly from a developer, and six in ten (65%) used the solicitor recommended by the developer.
  • Three in ten (31%) claim they are struggling to attract buyers because they don't own their property's freehold.
  • A staggering 94% of respondents said they regretted buying a leasehold, while 93% said they definitely wouldn't buy another leasehold property in the future.

As a result, nearly two-thirds (62%) of leaseholders feel like they have been mis-sold their property.

Mark Hayward of NAEA Propertymark says: 'If you buy a new-build house, you'd usually deal directly with the developer's sales team rather than an estate agent.

'But sales assistants aren't bound by the Estate Agents Act 1979, leaving buyers vulnerable and without protection, which explains why so many feel like they were mis-sold.

'It's time we listened to this and sought a robust solution for all those affected, unable to sell their homes, and serving a leasehold life sentence.'

Permission fees adding to costs

Propertymark's research also found that one in 10 homeowners have had to pay a charge to make cosmetic changes to their property. These charges are commonly - if not formally - known as permission fees.

On average, freeholders charged respondents £1,422 for permission to install double glazing, £887 to change kitchen units, and £689 to replace flooring.

Questions were also raised around service charges. If you buy a leasehold flat, service charges cover maintenance of any communal space or shared assets such as a roof or guttering.

However, standalone leasehold houses don't have communal areas, and this has resulted in service charges instead being charged to maintain outdoor communal areas on estates.

More than half (51%) of homeowners who responded to the NAEA survey said that between council tax and service charges, they feel they're paying twice for the same service.

  • Learn about how the two different types of housing tenure work in our full guide on leasehold vs freehold.

Our research into the leasehold scandal

Which? conducted the largest research project of its kind into issues surrounding new-build homes earlier this year.

Our full investigation: 'To have or to leasehold? Inside the leasehold new-build homes scandal' laid bare the various issues faced by leaseholders and how owners have been left with unsellable homes.

During the course of our research, Which? received 192 letters from leaseholders, covering leasehold issues with 19 housebuilders, including seven of the largest 10 developers in the UK.

Leasehold houses to be banned

Last December, the government announced measures to ban the sale of new-build houses as leasehold, and to set ground rents on new long leases to zero.

At this stage it remains unclear when these changes will come into force.

While the government also pledged to 'make it cheaper and easier for existing leaseholders to buy out their freehold', there are currently no indications around how specific redress would work for those with onerous clauses.

Leasehold Select Committee deadline approaches

The Housing, Communities and Local Government (HCLG) Committee recently launched an inquiry into the progress of the government's leasehold reform measures, looking in particular at the issues facing existing leaseholders.

The deadline for submissions is next Friday (14 September), with the committee inviting submissions on:

  • The adequacy of the government's programme of work on residential leasehold reform
  • What support can be provided to existing leaseholders affected by onerous terms
  • The implications of providing government intervention