Money Matters

Developers building housing estates are using homeowners as cash cows. Instead of allowing people to buy houses freehold, they keep the freehold and sell only leases.

Freeholders own property outright, including the land it sits on. Leaseholders own only the building, not the land, and just for a fixed number of years, after which ownership reverts to the freeholder. Leasehold tenure is more usually associated with flats.

Freeholders charge homeowners ground rent and service charges every year, an extra source of income that has tempted developers to retain the freeholds. But they have not been content with a peppercorn ground rent or modest service charges. They introduced clauses to the leases of the newly-built houses, ensuring the annual ground rent will double every ten years; so what starts at a few hundred pounds grows into thousands.

Even worse for the owners, developers have been selling the freeholds on to third-party investment companies, sometimes without telling the leaseholders first. In law, leaseholders have the right of first refusal to buy the freehold, once they have owned the property for two years.

Investment funds then employ managing agents, and managing agents impose even more fees called ‘permission