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Housebuilders must halt leasehold sale of new houses, says minister

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Housebuilders must halt leasehold sale of new houses, says minister

https://www.theguardian.com/money/2016/dec/20/housebuilders-must-halt-leasehold-sales-of-houses-compensation

 

Quote

Major housebuilders such as Taylor Wimpey and Persimmon may be forced to spend millions compensating home buyers locked into unfair leasehold contracts, following a warning by housing minister Gavin Barwell.

Amid accusations in the House of Commons of “the PPI scandal of the property sector”, Barwell ordered developers to halt future sales of leasehold houses or face government action next year.

He also told developers to come up with solutions for householders already stuck in homes where soaring ground rents have made their property virtually unsaleable.

“There is a widespread problem here that needs addressing. These practices are not illegal but it seems to be one of those cases where there is a gulf between the letter of the law and our sense of what is right...

 

 ..In one extreme case a constituent will see the ground rent on their home rise to £11,000 a year by the middle of this century, and then to £367m a year by the end of the lease period.

“It can only be described as a racket by the country’s biggest developers,” he added...

 

developers have been selling detached and semi-detached houses as leasehold, with clauses which allow the ground rent to double every 10 years. The freeholds are then sold on to private companies which extract the ground rent, charge high fees if a homeowner wishes to make alterations, and refuse to sell the freehold except for a huge premium.

Homebuyers have been left with houses they cannot sell as lenders will no longer offer mortgages against them because of the ground rent clauses. 

“My constituents have been comprehensively stitched up,”..

 

... Peter Bottomley MP told the Commons how one elderly couple challenged their £9,000 a year service charge and obtained a tribunal ruling striking out £7,000 of the costs. Yet they ended up with a legal bill from the other side for £70,000 and faced the forfeiture of their home.

 

Edited by Saving For a Space Ship

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I am amazed that leasehold has gone unoticed for this long really. Theres no need for houses to be leasehold at all (isnt 10 Downing St a leasehold house owned by the Duke of Westminster?), but flats do make sense if only the details were sorted out as common hold doesnt work as well as hoped.

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To be fair at the time of purchase you don't have much choice if the place you want to live in is sold that way. Happened to me with a new build, small fixed ground rent... but very annoying now having this attached to the property.

Good that MPs are looking at it. Should not be a feature of selling a house.

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I have also heard about restrictive clauses in new builds (otherwise freehold) where the owner is restricted from adding extensions or modifications without the building companies permission for several years after purchase which is just as stupid.

It apparently can be negotiated away at the last minute before signing if you have nerves of steel and a good legal assistance.

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If the charge goes to 11k a year in mid next century and then as in the op a stonking 367mm a year it was always going to be expensive to buy out. It doesn't seem reasonable but I'd expect the solicitor to advise a buyer on this and all the other related issues. Surely those buyers like in the OP got decent legal advice and the facts presented? They then made a decision to proceed and not walk (or run) away

Edited by Ash4781

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some twit tried this in ancient egypt...one grain of wheat this year, double the next, double again the next...and it quickly consumed all the grain in egypt. Or maybe it was in Aesop's fables. Or Hans Christian Anderson story. Either way, its common knowledge as far as I can be concerned. To think there must be a few houses with clauses like this, the race is on to be the first to consume all the pounds in england.

 

for gods sakes people, its your biggest, most expensive purchase ever...sit back and *think* about it, and if it sucks just walk away.

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3 hours ago, Ash4781 said:

If the charge goes to 11k a year in mid next century and then as in the op a stonking 367mm a year it was always going to be expensive to buy out. It doesn't seem reasonable but I'd expect the solicitor to advise a buyer on this and all the other related issues. Surely those buyers like in the OP got decent legal advice and the facts presented? They then made a decision to proceed and not walk (or run) away

If solicitors representing buyers all thought it was ok, then is it mis-selling? Or are conveyancers in need of new guidelines?

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My first place was leasehold, its quite common on old mill houses in Yorkshire. Ground rent iirc was 50p the first year, I never received any invoices after that. The house was built in 1897 with a 999 year lease. Could probably have been bought out for peanuts.

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AQ...'you dont have a choice'?

I would agree if we are talking about flats as they are all Leasehold but houses?...Of course you have a choice, if they (the developers) insist that the property is Leasehold you 'walk-away' and buy a Freehold property elsewhere...Lost income/sales will soon 'refocus' their customer service skills!

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The new property trap affecting thousands  

http://www.bbc.co.uk/news/business-38827661

Quote

Katie knew the house was leasehold - meaning she owned the property for the length of her lease agreement - but claims she was told by the sales representative that because of the long lease it was "as good as freehold"; a property owned outright.

She thought nothing of it, and says she was told she would be able to buy her freehold after two years, believing it would cost between £2,000 and £4,000.

But a year and a half later, she received a letter from Bellway saying her freehold had been sold to an investment company, which was now quoting £13,300 for her to buy it.

"At the moment I feel completely blind and in a corner and don't know which way to turn. There's legal action but that is very costly," she says.

Related ...

'I signed £1.3bn rent contract by mistake' Luke Mosson bought a flat for £150,000 but later realised that a clause in his contract meant the ground rent over the whole lease would cost more than £1.3bn.

http://www.bbc.co.uk/news/uk-38834621

Edited by Saving For a Space Ship

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The articles don't include enough facts to make a judgment. E.g. These lease terms could have been all pointed out by the solicitors /conveyancers at the time. One purchaser  seems to have got a calculation of the estimated cost to purchase the freehold from somewhere but we are not told from where!

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This started to be reported nearly 2 years ago:

http://www.thisismoney.co.uk/money/mortgageshome/article-3088134/The-great-divide-Buy-165-000-house-left-road-outright-buy-one-right-don-t.html

I can't find the link now, but I'm sure one report (which seemed to be written by somebody who understood the whole thing) said that these outrageous escalations were only in the first 20-30 years of the lease. The implication is that journalists and politicians have assumed escalation thoughtout the lease period.

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On 21/12/2016 at 7:03 AM, Ash4781 said:

If the charge goes to 11k a year in mid next century and then as in the op a stonking 367mm a year it was always going to be expensive to buy out. It doesn't seem reasonable but I'd expect the solicitor to advise a buyer on this and all the other related issues. Surely those buyers like in the OP got decent legal advice and the facts presented? They then made a decision to proceed and not walk (or run) away

http://www.bbc.co.uk/news/business-38827661

"But nowhere on Bellway's website is this system made clear to potential buyers and Katie feels these facts were not made clear to her. She also says the solicitor - recommended to her by Bellway - made no mention of this possibility either.

Katie says because she bought the house through the government's Help To Buy scheme, she felt she could trust the process."

 

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45 minutes ago, LivingWithTheInlaws said:

http://www.bbc.co.uk/news/business-38827661

"But nowhere on Bellway's website is this system made clear to potential buyers and Katie feels these facts were not made clear to her. She also says the solicitor - recommended to her by Bellway - made no mention of this possibility either.

 

I don't know what is worse, the parasitic rentiers who suck £k of ground rent from homeowners each year for doing absolutely nothing, or the parasitic professional classes who charge £k in fees for providing dismal and uninformed advice that is somehow worse than you would get from a layperson.

Recommended or not, the solicitor still works for their client and should have been all over this, it is not difficult stuff. I would like to see their rear quarters black and blue for recommending purchase of a property that would become zero value without a buy out costing £10s thousands. Many of these escalator clauses are even written into the purchase.

The government shouldn't need to regulate to make houses freehold, the whole leasehold concept needs proper legislation.

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Just now, LivingWithTheInlaws said:

http://www.bbc.co.uk/news/business-38827661

"But nowhere on Bellway's website is this system made clear to potential buyers and Katie feels these facts were not made clear to her. She also says the solicitor - recommended to her by Bellway - made no mention of this possibility either.

Katie says because she bought the house through the government's Help To Buy scheme, she felt she could trust the process."

 

Taylor Wimpey, Bellway, Homeground et al GFY!!! Not only do Homeground charge the Earth for freehold possession but they have a list of permissive fees that'll add up to a tidy sum across their freehold title portfolio. You want a pet - fill this form in together with a cheque for £40, permission to sublet? £108 thank you; request to consider buying the freehold £140. There are no guarantees either and I'm certain these forms will only be the start of being raped financially.

It's a scam of the highest order. Why is this still legal.

Edit: if Katie had done her homework and read the paperwork as she is doing in one of the photos then she wouldn't have  put herself in this mess in the first place.

Edited by longtomsilver

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For sure those drafting the contract will know the implications and more than likely they anticipate eventually doing purchasers "a favour" and relieving them of their home for peanuts to allow them to escape from the contract.  

Some purchasers will fight the contract of course but as has been pointed out earlier the legal charges can be so high (probably a local mate of the legal person who helped draft the original contract as well) they might as well have just got rid of the property.

Buyers should read the contract especially when it's an unusual set up - but how many do, they rely on their solicitor to advise them of risks and consequences etc.  Maybe they did advise them.

Everywhere you turn it's a rip off.

Edited by billybong

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