Homeowners stuck in the leasehold trap are furious that Government is yet to help them after it committed to capping ground rents on new leaseholds at just £10.
The proposals, published last month for consultation, will save thousands of future homeowners from paying escalating ground rents and fees but offer nothing to existing leaseholders, many of whom cannot sell their homes.
Jo Darbyshire, founder of the National Leasehold Campaign and herself a homeowner caught in a leasehold nightmare, was incensed by the apparent lack of action from officials who have been promising to deal with the scandal for 18 months.
Jo Darbyshire, founder of the National Leasehold Campaign and herself a homeowner caught in a leasehold nightmare, was incensed by the apparent lack of action from officials
‘The consultation offers nothing for the thousands of leaseholders caught up in the leasehold scandal, in unmortgageable houses and flats with high ground rent,’ she said.
‘More help is needed for leaseholders who are trapped in homes that were systematically mis-sold. Many will be unable to afford to enfranchise or live in flats where enfranchisement is difficult and in some cases impossible.’
But Government has defended its plans on the grounds that once a legally binding contract is in place, there are few options to intervene.
It said: ‘We take this matter very seriously. A number of developers have already introduced schemes to assist people, but these must go further and faster.
‘We are keeping a close eye on progress and will keep under review the full range of measures that could be pursued where further action is necessary.’
There are an estimated 4.3 million leasehold homes in the country, 1.4 million of which are houses.
Thousands of the families living in these homes are still paying escalating ground rents and fees, and although the Law Commission is looking at ways to make it easier for leaseholders to buy their freeholds, it is not expected to publish results until next year.
Maintenance fees are also causing problems
While the Government is busy exploring ways to end the ground rent scandal, the issue of onerous maintenance fees is yet to be properly addressed.
Another leaseholder, a widowed mother living with her young daughter, fears she will be left in ‘dire’ financial straits after her estate fees tripled in just two years.
Librarian Lynn Myers, 52, lives in a new two-bedroom house with her 15-year old daughter on the edge of Penrith in Cumbria. When she bought her home in late 2016 on a quiet estate of newly built houses, she was thrilled.
But in just two years, Lynn has been left regretting her decision to buy after her builder, Persimmon, appointed estate management company Gateway Property Management.
Leasehold prisoner Lynn Myers says her condition is affecting her mental and physical health
Now Lynn says the stress of mounting charges is starting to have an impact on her health.
‘This is affecting my mental and physical health. I truly do not know if on top of full council tax, I can afford these estate fees together with my ground rent once my widow’s pension stops in three years’ time,’ she worries.
‘When I need to sell my home due to lack of finances, I am not sure it will now sell and so I may well be stuck in a dire situation.
‘It’s the fees that are toxic. Don’t believe a word the sales office tells you.’
Lynn is one of the many victims of the leasehold scandal which erupted last year that has seen several builders drop the controversial contracts and sell freeholds to homeowners instead.
What are the charges associated with leasehold?
Fees and charges associated with a leasehold property can be many and varied, and may not be immediately obvious to anyone who is thinking about purchasing or selling a leasehold property.
To help understand the three types of charges commonly associated with leasehold property – ground rent, service charges and administration charges – the Conveyancing Association, the trade body for the conveyancing industry, has put together a guide which outlines what they cover, what they might cost you, and whether they are reasonable or not.
These fees tend to be payable to the lease administrator who will normally be a person or company employed by the landlord – who owns the freehold – to administer and manage the building.
However, some developers are still requiring buyers to sign up to leasehold agreements.
When buying a leasehold property rather than a freehold, residents must pay ground rent and other fees to the owner of the freehold as well as seek permission if they want to make changes to their homes.
Unexpected charges started to appear
Lynn says she knew when she bought the house that she would have to pay additional fees. She knew her ground rent was £150 a year and that it would rise every 10 years, in line with RPI.
She also knew she would have to pay for grass cutting as part of her estate fees to the estate management company, listed on her reservation agreement as £100 in the first year.
In July 2017 however, Persimmon handed the management of the development over to Gateway, and Lynn’s estate fees began to rise.
‘I received a bill in 2017 for nearly £300 – £141 pro rata – treble what was on my reservation agreement,’ she said.
‘I was also one of a handful of residents charged for a parking court which bumped our bill up considerably.’
Lynn claims that in a meeting with the residents in November 2017 the estate management company stated that it was considering refunds, but this has not yet come to fruition.
Leaseholds are often used to sell new builds direct from a developer, often to first-time buyers
‘All my late husband’s money is in this house,’ she said. ‘This is his legacy and we’ve been cheated. I bought this house to get my daughter through school.
‘We wanted low running costs. In three years my widow’s pension will end and I will struggle to pay these fees. It’s been dreadful, the stress is unbearable.’
A Persimmon Homes Lancashire spokesman said: ‘Information about management charges associated with the maintenance of public open spaces at Carleton Meadows was provided to customers during the purchase process.
‘The management charges are reviewed annually and are reflective of the scope and regularity of maintenance required on the site.
‘The fees for the current year have reduced from the previous year, with all changes discussed with residents at annual meetings and confirmed in writing.’
Gateway Property Management claims that the fees charged to residents on the estate are in proportion to the work required to maintain it.
A recent survey found that a third of leasehold house owners are struggling to attract a buyer
Mikaila Teare, chief administrative officer of Gateway Group, said: ‘The maintenance amount charged to residents is directly proportional to the work undertaken in maintaining the development by independent contractors and for the management company to fulfil its legal obligations.
‘All funds collected are held in trust for the benefit of the development and its residents. Of the maintenance charge collected our fee for managing this development equates to £35 per unit per annum.
‘Refunds are only made if the actual expenditure incurred during the year is less than that originally budgeted for.
‘We do understand the frustration of some homeowners having to pay both council tax and charges for maintaining areas of land that historically may have been adopted by local authorities.
‘However, there are many homeowners who prefer to have control of unadopted land because they can decide how it is maintained.’
Gateway did not comment specifically on Lynn’s fees or its management of the Carleton Meadows site.
Why is there a scandal around leasehold properties?
The leasehold scandal emerged last year after it came to light that property developers had been flogging leasehold properties with high fees and spiralling ground rents attached.
Some developers included aggressive ‘doubling clauses’ in sales contracts that hike ground rents at an alarming rate, ultimately trapping some people in homes they cannot sell.
Once the purchases were complete, in many cases property developers then sold on freeholds to third party companies without informing the homeowners.
In some of the worst cases, freeholders were slapping homeowners with fees to make elementary amendments to their own homes – £252 to own a pet or £60 to put up a doorbell.
A recent survey by estate agent tradebody NAEA Propertymark found that a third of leasehold house owners are struggling to attract a buyer because they don’t own the freehold, and a quarter have had interest from house hunters who were deterred once they found out the property was leasehold.
As a result of this, one in five has actively tried to buy the freehold to make their property more attractive to prospective buyers, while 41 per cent are thinking about doing it.
The vast majority, 93 per cent, say they definitely wouldn’t buy another leasehold property because of their experiences. For This is Money’s guide to leasehold property, click here.
If you are stuck in the leasehold trap, get in touch: firstname.lastname@example.org