You're sitting in the pristine marketing suite of a new-build housing development, beaming with pride at having saved enough money to buy your very first home.But there's something the slick sales team aren't telling you. You may be able to buy one of their properties, but you won't ever truly own it.
This is the realisation dawning upon thousands of homeowners that bought a property on a 'leasehold' basis, who are now trapped in properties they can't sell or even make changes to without paying for the honour.
One owner we've spoken to was charged £252 by their freeholder to have a pet, another £60 to ask if they could change their doorbell, and another actually threatened with repossession after building a conservatory on her own home. Countless others have belatedly discovered that their ground rent, currently a few hundred pounds a year, will double every decade, meaning bills for thousands of pounds in the not-too-distant future.
It's no wonder that some refer to this system as 'fleecehold', or 'the PPI of the housing industry'.
Here, we investigate a tale of antiquated clauses, spiralling fees, greed from faceless investment firms and shoddy legal advice - all of which have contributed to the growing scandal rocking the property industry.
When you buy a home, you will either be doing so on a'leasehold' or 'freehold' basis - though some properties are sold with a 'share of the freehold'.
Ground rent is an ancient - and controversial - phenomenon. In some cases leaseholders only need to pay a 'peppercorn' rent of perhaps a few pounds a year to maintain the lease. In other situations, however, annual ground rents can run to hundreds or even thousands of pounds.
This has been a talking point for hundreds of years, with the 1977 Survey of London referencing the rising popularity and value of leasehold estates - and thus ground rents - in Mayfair as early as 1721. With this in mind, it's easy to see why some claim that ground rent has no place in the modern property market.
The government estimates that there are more than four million leasehold homes in England alone, and traditionally these have almost exclusively been flats. In recent times, however, developers have been selling houses as leasehold, too.
Ground rent might not sound like a major concern, but in recent years developers have taken advantage of the lack of rules surrounding how much a freeholder can charge and how often they can increase the bill to turn leasehold homes into goldmines - all at the expense of naive, unsuspecting or badly advised buyers.
Bank adviser Andrea Millward, 36,bought her first home - a new-build Taylor Wimpey property in Merseyside - in 2011. She was encouraged by the developer to use its recommended , a firm called Bannister Preston, whom she was told would be looking after the legal particulars for the whole development.
The house was sold as leasehold, and was therefore subject to ground rent. A letter sent at the time from Bannister Preston confirmed that the property would be subject to a ground rent of £295 a year, a figure they stated would be reviewed every 25 years.
While £295 a year might seem a little on the steep side, it certainly wasn't enough to discourage Andrea from buying the house.
Yet in March 2017, six years and three months after she purchased her home, Andrea was approached by a neighbour who had noticed her own ground rent bill was set to double in January 2018.
On checking her lease, Andrea discovered that ground rent reviews were based on the term of the lease commencing on 1 January 2008, rather than 2011, when she had purchased her property.
While it can be fairly common - albeit surprising - for lease terms to begin when a development starts being built (or even when a deal is signed off for the build) rather than when a property is bought, this doesn't explain why a 25-yearly ground rent review would take place after six years.
It transpired that Andrea's 'rent review' actually takes place every 10 years, rather than the 25 years stated by the conveyancer. And with the 10 years technically starting in January 2008, the increase was imminent.
Why did Andrea miss this crucial piece of information? Just look at how it was described in her lease: 'On each Review Date the rent is to be increased to double the Rent reserved before the relevant Review Date and the reviewed Rent will be payable from and including the relevant Review Date'.
On approaching Bannister Preston for clarity, Andrea was informed that the original information (25 years) was simply a 'typographical error'.
Perhaps so, but that error starts to look expensive if your annual bill is set to double every decade, rather than every quarter-century. While the increase would mean the bill for the next 10 years would be a hefty £590 per annum, that's only the tip of the iceberg. The table below shows how Andrea's annual ground rent costs will escalate under the 10-year doubling clause.
|Date of ground rent review||Annual ground rent|
Whoever owns the property in 50 years' time will be charged nearly £9,500 a year in ground rent alone, effectively rendering it unsellable. After all, who would want to buy a home with this in its lease? Indeed, Andrea told Which? that the clause has already led two estate agents to refuse to market her home.
This certainly isn't an isolated case. Another homeowner, civil servant Chris Martin, 43, tells an almost identical tale.
He was also incorrectly informed by Bannister Preston about how often his ground rent would double on a property he bought off-plan in 2009, and faced a similar issue - with his original annual bill of £250 set to reach £8,000 in 50 years.
Chris told Which? that when complaining to Taylor Wimpey about this issue, he felt he had been treated with 'nothing but disdain' by the developer.
Bannister Preston says it is unable to comment on the specific cases but has confirmed that it was its standard practice to report on the terms of leases, including ground rent doubling clauses, before its clients purchased leasehold properties.
The firm pointed to Taylor Wimpey's Ground Rent Review Assistance Scheme, which it claims remedies the issue (more on this later), and advised that if leaseholders have any queries about this process they should seek independent legal advice.
Taylor Wimpey told us that all of its customers received independent professional legal advice from regulated legal firms when purchasing their properties and signing their leases. It added that it would expect all solicitors to explain all aspects of the transaction to their clients, including the ownership structure of a property and any rent reviews.The developer told us that it can't comment on the advice that any firm of solicitors provided to its client as that's a 'confidential matter between them'.
In 2017, the presence of these clauses started attracting media coverage. In response, Taylor Wimpey set about offering some redress; for example it gave Andrea Millward the opportunity to change her doubling clause to instead rise in line with the Retail Prices Index (RPI) - a common measure of inflation.
This, however, was with the stipulation that she would waive future rights to make claims against the developer, although she was still free to take action against any third party.
However, Taylor Wimpey has now told Which? that entering into a formal settlement when converting a lease is reasonable - but that this waiver of future rights would only apply to the ground rent doubling clause, and not any other issue.
Andrea didn't accept the offer from Taylor Wimpey as she planned to avoid ground rent altogether by purchasing the freehold from the developer. But here, she ran into an even more pernicious part of the leasehold scandal.
In theory, homeowners can buy their freehold after living in a property for two years - but in reality it's rarely that simple. Freehold purchase can be both confusing and expensive, as the buyer must pay for valuations and the legal costs of both sides. Many leaseholders also face long-term battles with - or, perhaps worse, silence from - their freeholder.
What's more, owners of leaseholds who attempt to buy their freehold after the requisite two years often find that their developer has quietly sold it on to an investment company without telling them. While this is permitted by law, it can make life very difficult for leaseholders.
At one step removed, it's easy to see the attraction. Freehold sales provide helpful lump sums to housebuilders, and ground rent doubling clauses cause investors' eyes to light up at the prospect of guaranteed increasing returns.
Many of the letters we've received from leaseholders follow a similar pattern. First, when purchasing the home, the buyer asks if they can buy the freehold there and then. The sales staff (or, in some cases, solicitors) tell them they'll be able to purchase the freehold by law after two years - often for an informally estimated sum of just a few thousand pounds. In many cases, buyers claim to have been actively discouraged from trying to buy their freeholds up front.
Fast-forward two years, and the buyer receives a letter from a company claiming to be their new freeholder (or a managing agent on its behalf), specifying details of ground rents, service charges and permission fees. From this point, they have a new 'landlord', and their dealings with the property developer are over.
Andrea Millward claims she was told she would have the right to buy her freehold after owning the property for between two and 10 years for 10 times the annual ground rent (a total of £2,950) - a statement several of leaseholders have echoed.
After discovering her ground rent doubling clause, she looked into purchasing the freehold and found Land Registry records showing it had been sold to athird partyfor approximately £7,000.
On enquiring about the cost of buying the freehold, a freehold valuation specialist estimated that purchasing it at this point would cost £30,000-£40,000.
Andrea isn't alone: one homeowner told Which? they were initially quoted £5,000 to buy their freehold, a figure that tripled once it'd been sold on without notice. Another speaks of a quote rising from £2,400 to £13,000.
Chris Martin suffered this fate, telling Which?: 'Since I purchased my house, my freehold has been sold on three times to various investment companies - and at no point have I been offered the opportunity to purchase it or been consulted prior to it being sold on.'
It's not uncommon for freeholds to be sold on several times to different investors, who then use management companies to collect debts from their leaseholders. This makes the system even more opaque and necessitates a great deal of research from the leaseholder to find out who their freeholder actually is.
This - as with many of the issues surrounding leasehold homes - might seem unpalatable, but it isn't illegal. Taylor Wimpey told us that it has always sold freeholds because 'the administrative structures needed to manage a portfolio of freehold interests are very different to a housebuilder's core business'.
But with so many people finding that their freehold has been bought by a faceless investment company without them even knowing, it's easy to see how some leaseholders feel duped - and powerless.
In addition to ground rent and service charges, many leaseholders must also pay fees to the freeholder if they want to make any changes, whether big or small, to their properties.
One homeowner told Which? that such clauses mean leaseholders feel like they have to 'pay for permission to paint [their] own front door', while others told us they felt like tenants in their own homes.
Whether the concept of permission fees is right or wrong, there are undoubtedly questions to be raised about how they vary in both cost and breadth, and why no regulation is in place over the maximum amounts that freeholders can charge.
In recent months, many leaseholders have contacted Which? about what they consider to be unreasonable permission fees, citing the double whammy of paying a flat fee (often £108) to even make a request, followed by another - often larger - fee to actually obtain permission.
Of course, while these fees can be a hindrance, in many cases homeowners are well aware of them. But what happens if you buy your new-build home second hand and have no idea that you'll be liable for such costs?
That's what happened to one Which? reader, who asked to remain anonymous. Our reader tells us she built an extension to her leasehold home in 2012, after applying for planning permission from the local authority and having her proposal signed off by buildings regulations.
Five years later, she received a letter from a managing agent working on behalf of her freeholder. The agent claimed she had breached the terms of her lease and that 'our client [has] the entitlement to terminate the lease and, subject to due process of law, take back possession of your property'.
Bewildered and scared, the homeowner asked if she could retrospectively pay the flat request fee of £50. The managing agent refused and said that, had the request been made at the time, a permission fee of around £500 would have been charged - but to apply retrospectively the fee would be £1,600, to be paid in nine monthly instalments.
All of this adds up to a highly confusing picture for leaseholders, raising questions about the transparency of freehold sales to third parties, the lack of protection against unreasonable permission fees, and of course serious concerns about how some conveyancers have failed to properly advise leaseholders about the terms of their contracts.
But with all the furore surrounding leasehold for existing owners in the last year, what's it been like to actually try and buy a leasehold property?
Often, when people ask how long it takes to buy or sell a home, the rather unhelpful response is 'how long is a piece of string?' After all, even the most straightforward transactions nearly always face delays and frustrations, and sometimes collapse entirely.
Now imagine trying to do this with a leasehold property with a ground rent doubling clause in the midst of the developing scandal.
That's the challenge that has faced - and is still facing - 37-year-old sales consultant Lee Camp and his wife Sarah,and their buyer, journalist George Martin, 28 (no relation to Chris, the other leaseholder we've discussed) - who all simply wanted to complete the sale and purchase of a Taylor Wimpey flat in Mitcham last year.
In spring 2017, George had his offer accepted on the Camps' flat and started going through the legal formalities. But a spanner was thrown into the works when George's solicitor alerted him to a punitive ground rent doubling clause in the lease. This discovery prompted Nationwide - which the previous month had become the first lender to stop giving mortgages on homes with ground rent doubling clauses - to cancel George's mortgage offer.
George told us: 'We were actually glad when our mortgage got cancelled. We had no intention of becoming stuck in a property we'd never be able to sell.'
The same year, Taylor Wimpey launched a £130m Ground Rent Review Assistance Scheme to cover the costs of - which amend existing leases to state that ground rent will rise in line with inflation rather than doubling every decade. In doing so, it became the first developer to openly admit to including the onerous clauses in its leases.
After George's mortgage offer was revoked, the homeowner Lee Camp applied to join the Taylor Wimpey scheme in order to have the ground rent clause removed and enable the transaction to proceed.
Lee discovered that the scheme only offers redress to those who have purchased homes directly from Taylor Wimpey, meaning George had had a lucky escape.
George says: 'At this point we were optimistic that things would be swiftly sorted, but we then spent months chasing for updates and getting very little back.The uncertainty about timescales added to our frustration and was hugely stressful.'
In July, Lee lost the house he was buying due to these delays. He says: 'Our son was one at the time and we wanted to move to a house with a garden that we could enjoy together as a family. We found an ideal place but at the final hour, the bombshell broke about the lease issue and our deal fell through.
'We were saddened to watch the property slip away. Now, a year later, we have been priced out of our area and have had to look further afield to find a new home.'
It wasn't until February 2018 that George and Lee received the Deed of Variation notice andNationwide confirmed it would reinstate George's mortgage offer. Another twomonths later, the Deed of Variation was with the block's residents' committee for approval - cue another delay.
Lee says, 'The resident committee's solicitors advised them not to sign off unless all the leases were to be changed over, as it would create a two-tier system in terms of property values in the block. This put them in an impossible situation.'
At time of writing, 14 months after the Camps accepted George's offer, the purchase remains entangled in a web of managing agents, residents' committees, solicitors and housebuilders, as both buyer and seller wait to set a completion date.
Nationwide's refusal to offer mortgages on leasehold homes with punitive clauses was vital in ensuring George Martin didn't purchase a home that would eventually become unsellable.
But now, a year on, most other major mortgage lenders are still adopting a 'wait and see' attitude.
We contacted the 10 largest mortgage providers in the UK, which collectively hold a total market share of just over 80%. Most lenders said they were aware of the issues around leasehold and were committed to supporting borrowers with onerous terms - but few were willing to join Nationwide in formally setting out a policy.
|Lloyds||Conveyancer will advise if lease terms are unreasonable. If so, valuer will determine impact on case-by-case basis.|
|Nationwide||Won't lend if ground rent is more than 0.1% value of property. Doubling clauses banned.|
|RBS||Conveyancer and valuer must confirm lease terms are reasonable before funds released.|
|Santander||Doubling clauses banned - no lending if ground rent increases at more than RPI.|
|Barclays||No lending on leasehold houses (but they do lend on leasehold flats). Conveyancer will advise if lease terms are unreasonable. If so, valuer will determine impact on case-by-case basis.|
|HSBC||Failed to respond to enquiries from Which?.|
|Coventry||Homes with unreasonable clauses will be reviewed on a case-by-case basis.|
Correct as of June2018; lenders listed in order of market share according to the CML (largest first).
It remains to be seen how many leaseholders will ultimately be affected by doubling ground rents, punitive permission fees and freehold-purchasing problems.
The boasts almost 11,000 members on Facebook, many of whom are disgruntled leaseholders campaigning for change in the sector - and our own data suggests that Taylor Wimpey is far from being the only housebuilder to be causing homeowners heartache.
In 192 letters received by Which?, 19 different housebuilders and housing associations are mentioned by leaseholders - and the complaints cover seven of the 10 biggest housebuilders in the UK (according to data from the 2017 Housing Market Intelligence Report).
While Taylor Wimpey was mentioned in a third of the letters we received, Barratt, Bellway, Persimmon and Redrow also featured multiple times. However, these complaints were all around the sale of freeholds to third parties, not ground rent doubling clauses.
Aside from housebuilders, homeowners have highlighted issues with 15 different investment and property management companies - and many have expressed concerns about the advice they received from their conveyancers.
This question has been consistently raised, with some of the homeowners who contacted Which? telling us they are taking legal action against their conveyancers.
In the Which? Home Movers survey, conducted in December 2017, 10% of the 370 respondents who said they were leaseholders believed they were not clearly informed that they were buying a leasehold property at the point of purchase. Others may still be in the dark.
Many of the leaseholders in our survey had encountered problems with their properties, with freehold purchase costs (19%), ground rent increases (18%), and agents not carrying out repairs properly (17%) the most common complaints.
Of the 57 respondents who said they faced significant increases in ground rent, 37% told us they weren't made aware of such clauses when they bought the property.
It's been a year since Taylor Wimpey set aside its £130m pot - and in that time the developer has come under even more criticism, with some Which? readers claiming its assistance scheme is merely a PR stunt.
Taylor Wimpey told Which? that it listened to customer concerns and has taken action to put things right. It states that it was under no legal obligation to do this but wanted to help its customers. It also said it was 'in advanced discussions with freeholders who own the remaining small number of doubling leases'.
In April 2018, Countryside Properties offered deeds of variation to some of its customers affected by ground rent doubling clauses, enabling them to change the ground rent increases to move in line with the RPI.
The silence elsewhere has been deafening, with other major developers being less than forthcoming about redress for homeowners facing similar issues.
With more leaseholders becoming aware of punitive ground rent doubling clauses, it remains to be seen whether the other major developers will have their hands forced soon, either through pressure from leaseholders or formal government intervention.
As part of a suite of measures designed to , the government wants to make several big changes to the leasehold system in England to stop these issues rearing their heads for future buyers. Unfortunately, it remains to be seen whether any redress will be offered to existing homeowners.
In July 2017, the government launched an eight-week consultation into banning unfair leasehold practices. Among the proposals were plans to reduce ground rents to zero, or at least a transparent figure that would reflect the actual costs incurred by the freeholder. The consultation also aimed to gain responses on the feasibility of banning new-build houses from being sold as leasehold.
On 21 December, after reviewing responses to the consultation, the government announced its intention to follow through on these plans, as well as a drive to 'strongly discourage' developers from using on leasehold houses.
While this might not seem significant, between the launch of Help to Buy in April 2013 and the end of 2017, 39,384 (24.8%) properties sold under the scheme were leasehold - with 16,246 of these being houses.
As part of its response, the government said it would work with the Law Commission to try and create redress for leaseholders, making the process of buying freeholds 'easier, faster and cheaper'. An intention to provide 'clear support' for those suffering from onerous ground rent clauses and excessive permission fees was also pledged.
There are serious hurdles to overcome if homeowners are to be sufficiently compensated.
In January this year, campaigners lost a long-fought legal battle to slash the costs of extending leases. The Mundy v Sloane Stanley Estate case centred on a leasehold flat with just 23 years left on the lease, where the freeholder was demanding £420,000 to agree to an extension.
Campaigners, led by surveyor James Wyatt of Parthenia Valuation, claimed that the lease valuation system was invalid and that a new calculation system should be used. The Court of Appeal ruled against them.
In April, the Law Commission released a document outlining how it plans to review the leasehold market. However, this has been met with scepticism by leasehold reform campaigners.
Louie Burns of Leasehold Solutions says: 'In reality it will be several years before the Law Commission's report is published, and even longer until the government is in a position to propose legislation to tackle the many problems with the leasehold system.'
While progress is painfully slow, things seem to be moving in the right direction. The government has finally acknowledged that the leasehold system is a mess; developers are starting to sweat over once-lucrative freehold sales and mortgage lenders are becoming increasingly resistant to ground rent doubling clauses.
Most importantly, though, homeowners are angry, and getting angrier. Many of them have been sold the dream of a perfect new-build property, but these dreams have turned to dust as they realise 'their' new home is not truly theirs.
Whether due to bad advice from conveyancers or what many perceive to be the greed of housebuilders, unsuspecting owners have become trapped in unsellable properties. They've seen a few hundred pounds' ground rent spiral into bills for thousands. They've paid for the right to even ask if they can make improvements to their property, and paid again for the permission itself. They've been prevented from buying the freehold on their home, a legal right after two years' ownership, from a company they've never heard of - a company that refers to them as 'tenants' in their own home.
It may take many years to unpick the regulations around leasehold properties, and for some homeowners redress may come too late to truly make a difference, but with reform now on the government's agenda there at least remains some hope of progress.
It's sure to be a long, complicated road to redress - but this is nothing new for embattled leaseholders who feel they are only 'homeowners' in the loosest possible terms.