‘Landlord cost me £100,000. I was helpless’

Despite promises from the Government, leaseholders are still losing out in battles with freeholders, finds Sam Brodbeck

Six months after the Government committed to fundamental reform of Britain’s archaic property ownership rules, leaseholders still find the odds stacked against them. Following years of pressure from campaigners, Sajid Javid – then communities secretary, now Home Secretary – promised to take action on “unfair leasehold practices”.

The promised measures included a ban on the sale of new leasehold homes amid outrage over the onerous ground rent terms that some developers hid in contracts, leaving some properties unsellable.

These toxic clauses are no longer included in new contracts – but other leaseholders remain at the mercy of the whims of freeholders.

While most countries, including Scotland, have abolished the leasehold system, in England it has been growing in use. Under leasehold rules land itself is owned by the freeholder, while tenants buy a lease for a set number of years. Leaseholders must abide by the terms of the lease and pay, in an often lengthy and expensive process, if they wish to extend it.

When Anne Heelan, 49, bought her flat in a well-to-do part of west London, she could not have known that a battle with her freeholder would end up costing her at least £100,000.

Ms Heelan, a dentist, and her partner bought the ground-floor flat, one half of an Edwardian terraced house, a decade ago.

After the birth of their son they needed extra space, so put the flat on the market in 2016 and quickly found a buyer.

But at the exchange of contracts, the freeholder – who also owned the topfloor flat – said a “restrictive covenant” governing alterations to the property had been breached. It transpired that previous owners of the flat had made changes to the internal layout of the property and put in French doors more than 20 years ago.

The buyer decided to pull out, signalling the start of a “hellish year” for the couple, who found themselves locked in a bitter dispute with their freeholder.

He claimed that the changes had made the building unsafe. Eventually Ms Heelan and her partner decided that the only way to settle the matter was to take it to the High Court. After more delays, during which the couple racked up tens of thousands of pounds in legal bills, the case was due to be heard, only for the freeholder to fail to appear.

In January of this year the couple resorted to selling the property to the freeholder for £695,000, when its market value was closer to £750,000, according to Ms Heelan. This was on condition that the couple did not pursue him for costs incurred as part of the original lawsuit.

She said: “After a year and a half, he had us in a corner. We were battle weary. We’re educated people in a position to fight and we still lost. It’s appalling and we want to help other leaseholders.”

The couple ended up with legal fees of £45,000 and believe that they lost out on around £55,000 by accepting the freeholder’s offer for the flat.

With other costs – for extra surveys and insurance, for instance – the total was more than £100,000, Ms Heelan said.

“We looked at every kind of solution but felt totally helpless,” she added. “We have been pushed into rental while we try to find another place. “After our experience I really think we need to move towards a different kind of home ownership, like they have in other countries.”

Sebastian O’Kelly of the Leasehold Knowledge Partnership, a charity, said the case was “all too common”.

He added: “It is frankly outrageous that freeholders have this privileged position in law and it can be exploited to extreme degrees.”

A spokesman for the housing ministry said the promised reforms to the leasehold system required changes to primary legislation, but could not say when this would happen. Official statistics show there are at least 4.2 million leasehold properties in Britain, of which around 1.4 million are houses.

Later this year the Law Commission, an independent body that makes recommendations to the Government, plans to launch consultations on both “commonhold” ownership, another type of tenure, and how best to help leaseholders who want to buy their freehold.

Leasehold reform campaigners were dealt a major blow in January when the Appeal Court ruled in favour of the Sloane Stanley Estate, a landlord that was trying to charge £420,000 to end the lease on a flat in Chelsea.

‘It is frankly outrageous that freeholders have this privileged position’