DON’T BE RIPPED OFF TWICE
If you’re trapped by a toxic leasehold, it’s a tempting offer: sign a NEW contract to limit those hated charges. But as some homeowners have already found, the deals aren’t as good as they seem...
HOMEBUYERS stuck with rip-off leasehold charges are being urged to snub new deals offered by property giants — over fears they include costly pitfalls.
Developers are under huge pressure from ministers to strike voluntary deals with homeowners to lower or axe onerous fees buried in leasehold contracts.
These can include doubling ground rent, to extortionate permission fees for changing your windows or even getting a pet.
Ministers have failed to legislate against them and are instead urging homeowners to come to ‘voluntary’ agreements with the freeholders.
But critics say the deals on the table tie ground rent charges to an outdated measure of inflation which could end up costing them more.
And some of the new agreements could still mean they have to pay to make changes to their home.
Campaigners say it is ‘ lunacy’ to expect freeholders to act in homeowners’ best interests or let them out of profitable contracts voluntarily. Even buyers offered new deals say they feel ‘under duress’ to sign them in lieu of a better offer.
Even if leaseholders sign one of the ‘voluntary’ deals on offer from property giants, they could:
SIGN away their right to future compensation if firms are found to have mis-sold contracts.
CONTINUE to face big hikes in ground rent. FIND their homes are unsellable. STILL be hit with permission charges to have a pet, remortgage or build a conservatory.
BE FORCED to pay hundreds of pounds for legal advice. More and more houses, especially new-builds, have recently been sold without the freehold.
Developers have come to use freeholds as a way to make money and many have hiked rents, to between £200 and £400 a year, while some will double every decade.
Government estimates suggest there are 4.3 million homes with leases in England — 1.4 million of them houses.
Taylor Wimpey and Countryside Properties are among the developers who have used leasehold deals on new-build estates for several years. Both have now sold the leasehold contracts to investment companies.
Many customers were promised they could buy the freehold cheaply after a few years. But some have now been told by the investment firms it will cost them tens of thousands of pounds to buy it.
Now, after pressure from ministers, developers and the freeholders have offered to link many buyers’ ground rent to inflation, rather than doubling it every ten years or so.
Campaigners say property firms must allow leaseholders to buy their freehold at a fair price or negotiate fairer contracts.
Paula Higgins, of the HomeOwners’ Alliance, says: ‘ These deals that have been crafted by developers’ lawyers are unlikely to offer the best deal for the homebuyer.’
In 2017, Taylor Wimpey said it would voluntarily set aside £130 million to help families who bought direct from them to move to a cheaper deal.
It agreed leaseholders’ ground rent could rise by inflation rather than doubling every ten years.
Some third-party freeholders to which Taylor Wimpey sold the leases have also offered similar deals to some buyers, as has fellow developer Countryside.
BUT homebuyers say they are still left paying more than £100 to ask for permission to carry out renovations and then a further charge of up to £2,500 to actually carry out the works.
Leaseholders are being offered ground rent linked to the Retail Price Index (RPI) — a measure of inflation which the Office for National Statistics says is inaccurate, and is higher than the UK’s official measure of inflation, the Consumer Price Index (CPI).
Louie Burns, of Leasehold Solutions, says: ‘These new deals could be leaseholders’ best option, particularly if their rent is about to double. If they need to sell their home imminently, switching to RPI would make it more appealing to buyers. It would also make it cheaper to buy the freehold — typically a multiple of their ground rent.’
Mr Burns says: ‘It is ridiculous, to expect leaseholders to be properly compensated voluntarily. The leasehold scandal was devised by developers to maximise profits. To expect companies to change something they devised is lunacy.’
The Government has now pledged to outlaw the sale of new-build homes with leases.
Meanwhile, some buyers are pursuing legal action against their conveyancing solicitors, whom they claim should have better informed them of the punitive charges and restrictions they were signing up to.
A Taylor Wimpey spokesman says: ‘We listened to the concerns of our customers have had over their ten-year doubling lease terms and have taken action to put it right.
‘We were under no legal obligation to do this but we want to help our customers.’
With regards to fears that homeowners could sign away rights to future compensation, he adds: ‘This applies only to a final settlement of any claim in relation to the doubling ground rent. It does not impose any other restrictions to a customer’s ability to take legal action regarding any other
aspects of their lease, or claims against third parties.’
A housing ministry spokesman says: ‘We welcome proposals which mean leaseholders pay less ground rent.
‘We will not look kindly on those who reduce the cost of ground rents with one hand and rip off leaseholders with the other.’
A Countryside Properties spokesman says: ‘Working with the freeholders of those properties, we have provided leaseholders with an appropriate solution to ensure the leases remain affordable over the longer term. This has included the choice of either the purchase of the freehold or variation of the ground rent to increase with RPI.’