The town where it costs £13,000 to sell your house
... to the shock and fury of residents who are discovering the dream homes they thought were bargain came with a VERY big catch
AT FIRST glance, robert and Claire Snedden’s detached home in Cramlington looks like the perfect place to raise a family. It stands on a neat estate built in the late 1990s, and has three bedrooms, two bathrooms, a spacious garden and schools nearby with great ofsted reports.
Surrounded by countryside and a smattering of golf clubs, it’s also just a 20-minute drive to central Newcastle upon Tyne — a boon for commuters.
They bought it 11 years ago but now need something a bit bigger.
It’s up for sale at £209,000, which is above the national UK average but a very decent price for the area. It’s been on the market for four months and there’s been a string of prospective purchasers all falling in love with it — but the Sneddens have failed to sell.
It’s the same sticking point that sends all would-be buyers scurrying away. The problem? The Sneddens don’t actually own the land their house is built on. While the bricks and mortar belong to them, the ground it stands on is held on a lease — and will be for the next 82 years.
and everyone who has been interested in robert and Claire’s home will commit to buying it only if it’s turned into a freehold. But the bill for this from the existing landlord is a staggering £13,500. robert, 48, a finance manager at a car dealership, says: ‘It’s an extraordinarily large fee. I have no idea how this cost can be justified. It seems to have been plucked out of thin air.’
Despite asking for a detailed explanation from his home’s management company, Homeground, of why the freehold costs so much, it has so far refused to give one.
The Sneddens are far from being the only householders in this predicament. Two miles away, school teacher Nadia Karim, 33, is agonising over a similar demand for cash.
She bought her 1960s-built flat a year after the Sneddens. She’d just left university and it cost her £74,000.
last year, after talking to neighbours, she decided to check how long her lease was — and discovered it was for less than 50 years.
She then wrote to her management company, Simarc, who gave her a number of options. These included extending her lease by 90 years for £12,750, plus costs of £576.
‘I feel so angry,’ says Nadia. ‘I bought the flat because I was trying to do the right thing and I wanted an investment for my future. There is no way I can find that sort of money for a lease extension.’
Welcome to Cramlington, a town in hoc to landlords and leaseholders.
HOW DEVELOPERS MADE A KILLING
CRAMLINGTON sprang to life in the early Sixties as an overspill for Newcastle’s booming population.
Its identikit three-bedroom houses and cosy flats were seen as luxurious compared to the cramped terrace houses that the new arrivals were leaving behind.
The country was expanding at a rapid rate and Cramlington in Northumberland — previously little more than farmland and a hamlet — was deemed by planners a perfect spot to turn into a beacon of modern living. By the mid-1980s, its population had risen to 30,000.
But Cramlington was unlike other post-war new towns, such as Stevenage or Harlow, in that it failed to qualify for official ‘new town’ status. This meant it missed out on government subsidies, and there was also no official requirement to build social housing.
Instead, Cramlington became one of Britain’s first privatelyowned new towns.
It was built by local construction companies John T. Bell and William leech (now part of two of the UK’s biggest house builders, Bellway Homes and Persimmon), who remain landlords for many of the town’s residents.
Estate agents estimate that three-quarters of the town’s properties were sold leasehold, with leases typically lasting 99 years.
With a freehold property, buyers own the property and the land it is built on. With leasehold, you only buy the right to live in a property for the period of the lease — and pay annual ground rent to the landlord. ownership of the property reverts to the landlord once the lease expires.
When the bulk of the homes in Cramlington were sold, 99 years sounded a long time. But three decades on, these leases are coming back to bite homeowners.
SELLERS TRAPPED BY SHRINKING LEASES
THERE are around five million leasehold homes in the UK. The vast majority are flats but around 670,000 are houses.
many of those built today are sold with leases anywhere from 125 to 999 years, depending on the generosity of the landlord — so renewing the lease will not be a problem for many generations.
But in Cramlington, where many properties now have unexpired terms of between 50 and 80 years, homeowners are finding it very difficult to sell or remortgage.
mortgage lenders generally don’t like to lend against a home with a short lease because they don’t offer as much security. They’re perceived as riskier assets to hold. It leaves owners with little option but to extend the lease.
But this comes at a price — and one that rises sharply once its length approaches just 80 years.
In a nutshell, you have to pay extra for the ‘added value’ deemed to have been bought by adding to the lease’s life at such a late stage.
The formula is complicated but it takes into account the type of home, its location and condition
You can expect to pay an extra £10,000 on a £200,000 property for every ten years you leave extending the lease after it has dropped below 80 years. Those with less than 50 years to run face the biggest bills.
Often owners have no idea of the problem until they want to sell.
It will come as a particular shock to those who have never moved and had failed to realise just what buying a leasehold home involves.
With the soaring property market pushing up prices, many homeowners in Cramlington have decided to sell or remortgage to release cash in their home. It is only now that many are discovering how a short lease is stopping them from doing so. Local estate agents have reported a logjam of sellers struggling to afford the cost to extend the lease in order to sell.
Paul Reynolds, who owns Cramlington estate agents Renown, says: ‘It’s a ticking timebomb. Many people are oblivious to the fact that their homes are leasehold — but the landlords and management companies aren’t. And those landlords who demand high prices won’t negotiate.’
Paula Higgins, founder of the consumer group HomeOwners Alliance, says: ‘The problems that people are facing in Cramlington are terrible. Owners just don’t realise the extra costs of buying a leasehold property. It’s a really unfair system.’
THE MONEY MEN MAKING A MINT
INVESTING in freeholds has become big business among City firms over the past decade.
Companies snap up hundreds of freeholds and use the ground rent as a steady source of income at a time when interest rates are at rock bottom.
The investment company can re- sell the freehold to another buyer or make further gains when a lease needs to be extended.
Figures from property firm Savills show that over the past five years, investors have piled £1.2 billion into residential properties which have a ground rent.
But in Cramlington, councillors and property experts say it’s the town’s residents who are paying the price for these juicy payouts.
Families who have scrimped and saved to buy their properties complain that they have been asked to pay huge amounts to anonymous companies based hundreds of miles away in order to own their homes in full.
Prices for freeholds can vary even in the same street. And the cost of a freehold can jump by up to a third in the space of 18 months.
While some of the freeholders do offer a fair price for extending the lease or selling the freehold, estate agents agree that it is a huge problem for the area.
Owners can challenge the charges at a tribunal, but doing this can be both time- consuming and expensive.
Retired electrical engineer Ken Armstrong has spent months bartering with a London-based management company called Chancery St James on behalf of the freeholder — a company called Chime Properties.
He wanted to buy the freehold of two identical three-bedroom homes in the same street belonging to his daughter Beverley Heilman, 35, and stepson Ian Jennison, 49. The houses were built with 99-year leases dating back to 1974.
Beverley, an accounts specialist, received a quote from Chancery St James for £7,895, including costs. That’s nearly a tenth of the value of her property, which is estimated at £ 100,000. Beverley wrote back saying she couldn’t afford to pay. After months of to-ing and fro-ing, she negotiated it down to £6,000.
When Ian, a milkman, applied for his freehold, Chancery St James again offered to sell it to him for £7,895 — but agreed to drop this to £6,000 when the pair revealed their family connection.
But Ken, 66, remains angry. ‘How many people take the first offer they are given and pay through the nose?’ he says. ‘While £2,000 might not be a lot for these firms in London, it is big money for people round here.’
James Quinn, an independent chartered surveyor, says: ‘ These types of negotiations are an ordeal for families. It should be a simple calculation for all those involved.’
WHAT DO THE COMPANIES SAY?
THOUGH landlords are ultimately responsible for the properties, it’s the management companies that residents have to deal. Many are based in London at well-appointed offices but can be very difficult to get hold of. In some cases there is no phone number on a website, forcing homeowners to write or wait for email responses. Others only take calls for a limited two hours a day.’ A spokesman for Homeground says: ‘Homeground manages freehold properties for pension funds on a commercial basis and leaseholders can always make counter offers. All leaseholders can use the statutory route under the Leasehold Acts.’
A spokesman for Simarc said: ‘Simarc is a long-established company that acts in a professional manner and within statutory government guidelines at all times. It allows leaseholders to obtain a lease extension on a voluntary basis, saving them considerable fees.’
A spokesman for Chancery St James says: ‘We manage property assets on behalf of investors and as such we are unable to comment on specific cases. However, our clients are willing to negotiate on the amount payable for a freehold interest, just as they would be for any property transaction.’