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BBC: House owners rue leasehold purchases

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House owners rue leasehold purchases

https://www.bbc.co.uk/news/business-45431914

Almost half the people who bought a leasehold house in the past decade had no idea what they were getting into, according to a new study.

Homebuyers faced high fees and charges, with many feeling they were mis-sold.

The research follows controversy which led the government to crackdown on "unjustified" leasehold houses.

The National Association of Estate Agents warned: "Most buyers have no idea about the trappings of a leasehold contract until it's too late."

Leasehold house owners are often charged expensive ground rent as well as fees if they want to make changes to their homes.

The report found that leaseholders paid an average of £277 per year in ground rent when they moved in, and are currently paying £319, with most having been in their properties for three or four years.

It also said that freeholders typically charged home owners £1,422 to install double glazing, £887 to change the kitchen units, and £689 to replace the flooring.

Some faced bills of £527 for changing their blinds and £411 for installing a new front door.

As a result 94% of housebuyers regretted buying a leasehold while 62% felt they were mis-sold, according to the study.

Unsellable houses

A leasehold house can also be difficult to sell. A third of those currently trying to move said they were struggling to attract a buyer because they do not own the freehold. Meanwhile a quarter said house-hunters who were interested were put off when they found out it was a leasehold home.

Mark Hayward, chief executive of NAEA (National Association of Estate Agents) Propertymark, said: "In most instances, the freehold is sold onto a third party within a few years of the initial sale. This means the terms in the contracts homeowners have signed will change, and any negotiations are made more difficult."

Housebuilders started offering more and more new leasehold houses because it offered them an extra income stream either through ground rent or from selling on the leases to investment companies.

Many of the leases included onerous rising ground rents that have now been outlawed. Last year, Taylor Wimpey, one of the UK's biggest housebuilders, was forced to set aside £130m to compensate home buyers because of the scandal.

Last December, a government crackdown put a stop to the sale of new leasehold houses in England.

And in June, the Secretary of State for Housing, James Brokenshire, announced that housing developers would no longer be able to use any new government funding schemes for unjustified new leasehold houses.

Mr Hayward called on the government to ensure that leasehold homeowners were treated transparently and fairly in the future.

He said: "Almost all of the homeowners we surveyed say they wouldn't advise their friends or family to buy a leasehold home, which is a damning indictment on the industry. It's time we listened to this and sought a robust solution for all those affected, unable to sell their homes, and serving a leasehold life sentence."

He reckons buyers of new-build homes should have access to an ombudsman scheme and that freeholders of leasehold properties should be required to sign up to a redress scheme.

Take advice

A Ministry of Housing, Communities and Local Government spokesman said it was "unacceptable for home buyers to be exploited through unfair and abusive practices within the leasehold system".

"This is why we have already announced measures that include a ban on leaseholds for almost all new-build houses and restricting ground rents to a peppercorn."

He said the government was also working with the Law Commission to support existing leaseholders to make buying a freehold or extending a lease "faster, fairer and cheaper".

A spokesman for the Home Builders Federation said: "The vast majority of new-build houses are sold on a freehold basis, but it can be necessary on occasion to sell new houses with leases. As such, leasehold is a well-established and secure tenure with which to own a home.

"In all transactions, builders strive to provide prospective purchasers, their solicitors and their mortgage lenders with all relevant information.

"Purchasers are always advised to engage their own legal advice during the purchase of a home."

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1 hour ago, rantnrave said:

It also said that freeholders typically charged home owners £1,422 to install double glazing, £887 to change the kitchen units, and £689 to replace the flooring.

Some faced bills of £527 for changing their blinds and £411 for installing a new front door.

Paying twice to improve someone else's property / land. A bit like offering to mow / do some tree surgery on someone's else's field at your own expense, but also you pay them more money on top of that.

Economic genius, developing nations must be shaking in their boots. Perhaps we should have shops where you give them free food for them to sell to you, which you then pay for to get?

Edited by Arpeggio

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I wonder why the government crackdown didn't include the huge number of existing leasehold properties in London :rolleyes:

In terms of miss selling. That's firmly on whatever solicitor they used. I've got a feeling they most will have covered themselves for this eventuality....

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Leaseholds can be horrific, but any examples of this I've come across are people who knew there would be completely unaffordable ground rents in thirty years or so, but hoped to sell it on at a profit long before then. Not surprising they'd be the same people to claim mis-selling, I suspect they overlap with the whiplash claim demographic too.

The taxpayer isn't liable for any of this, but this article suggests they'll pay for the freeholds in the end and get nothing in return.

3 hours ago, rantnrave said:

He said the government was also working with the Law Commission to support existing leaseholders to make buying a freehold or extending a lease "faster, fairer and cheaper".

This looks like a subsidy is in place already.

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Possibly related, painful enough:

https://www.zoopla.co.uk/for-sale/details/46752550?search_identifier=29fad368fe48c870534c29a7f934da72

Price history

Sold prices provided by Land Registry

15th Aug 2018 £60,000 Price reduced by £14,950
10th Jul 2018 £74,950 Price reduced by £5,000
5th Jun 2018 £79,950 Price reduced by £2,550
17th May 2018 £82,500 Price reduced by £2,500
3rd Apr 2018 £85,000 Price reduced by £4,950
27th Feb 2018 £89,950 First listed
16th Jul 2015 £167,500

 

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9 minutes ago, darkmarket said:

Possibly related, painful enough:

https://www.zoopla.co.uk/for-sale/details/46752550?search_identifier=29fad368fe48c870534c29a7f934da72

Price history

Sold prices provided by Land Registry

15th Aug 2018 £60,000 Price reduced by £14,950
10th Jul 2018 £74,950 Price reduced by £5,000
5th Jun 2018 £79,950 Price reduced by £2,550
17th May 2018 £82,500 Price reduced by £2,500
3rd Apr 2018 £85,000 Price reduced by £4,950
27th Feb 2018 £89,950 First listed
16th Jul 2015 £167,500

 

Worth pointing out the above is an auction listing so not supposed to sell that low, but link to recently sold nearby shows another one... 

Sales history

Sold prices provided by Land Registry

  • Feb 2018 Sold£124,950
  • Dec 2015 Sold£159,995
  • Oct 2015 Sold£128,995

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3 minutes ago, A third of everything said:

Worth pointing out the above is an auction listing so not supposed to sell that low

The move to auction is reflected in the drop from £75k to £60k, but the write-down was already >50%. If it is what it appears to be, I wouldn't go there even at £1.

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To me, this is probably the only mis-sold product over the years that has actually been mis-sold. I can understand how people wouldn't believe that such a medieval, feudal system could exist in 21st century UK.

All the other mis-sold products I don't think were mis-sold. My sister got an endowment mortgage and knew what she was getting into. I had several loans over the years when PPI was around and always turned it down.

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16 hours ago, A third of everything said:

Worth pointing out the above is an auction listing so not supposed to sell that low, but link to recently sold nearby shows another one... 

Sales history

Sold prices provided by Land Registry

  • Feb 2018 Sold£124,950
  • Dec 2015 Sold£159,995
  • Oct 2015 Sold£128,995

It does say its ideal as an investment opportunity so it should be ok

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Edit: posted on the wrong thread - was thinking about HTB rather than leasehold houses. 

Edited by Ah-so

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On 07/09/2018 at 11:56, bushblairandbrown said:

Freeholds used to sell for naff all. The rise in their price is a good proxy for the proliferation of rent seeking behaviour we have seen over the decades. 

I would convert all leaseholds to commonhold overnight. Stuff the freeholders. 

+ 100%

This is what should happen

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There was some quite serious miss selling going on, happened to my friend. He was told they had two years to buy the leasehold, they actually meant two years from when the first brick of the estate was laid meaning in reality they had two weeks! Personally I told them to all club together, burn their houses to the ground and hand the banks the keys - start again. 

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Quote

"The court ruled the breaches to be serious and ordered Mr McCadden to pay Dr Malik £216.62 in outstanding charges and to reimburse her for the £300 tribunal fee."

What was he thinking?

  1. Didn't apply for permission.
  2. Didn't defend himself properly at the FTT.
  3. Didn't just pay the £500 judgement fee.

He'd improved the property (so long as he'd not made any structural changes) landlord would have trouble convincing a court any loss was incurred.

The usual way this pans out is Landlord waits until tenant sells.  Asks for a lot of money to account for breach of covenant, tenant pays as they lose the sale otherwise.

Whole system stinks, don't buy leasehold if it can be avoided.

Edited by sisyphal

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14 minutes ago, sisyphal said:

FTT tribunal decision

https://decisions.lease-advice.org//app/uploads/decisions/act85/12001-13000/12486.pdf

DM paints the freeholder as the wrongdoer, but there's a lot more to it. 

 

True. A good read. However, the sins of the lessee hardly amount to damages of £600,000. Yes, he created a bit of dust and may have cracked her plaster, but it hardly seems proportionate, even if legally correct.

Perhaps not turning up to court was the biggest error.

Edited by Ah-so

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15 minutes ago, sisyphal said:

FTT tribunal decision

https://decisions.lease-advice.org//app/uploads/decisions/act85/12001-13000/12486.pdf

DM paints the freeholder as the wrongdoer, but there's a lot more to it. 

 

And a bit irresponsible to put her picture there also along with the story angle.

Skimming through that people of a certain bent may read it as nasty immigrant steals disabled British mans flat on legal technicality (possibly the objective).

Will be interesting to see how this pans out if she lives in the flat below I would be taking extra security precautions after that.

The guy must have a screw loose how do you let this happen.

 

Edited by Fromage Frais

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2 hours ago, Dorkins said:

First rule of buying property in England: never buy leasehold.

I bought a leasehold house many years ago and so did my daughter.The knack is to keep quiet until your about to complete.Work out how much it will cost in two years time to buy the freehold (you have to wait  two years) and then drop it the day before you complete,oh im backing out its leasehold unless they drop the price by x amount.I doubled the cost of buying the freehold and got it knocked off then bought it two years later.£2k for freehold back then got £4k knocked off.My daughter did the same,£5k to buy freehold got £9k knocked off and then bought it.The sellers all know nobody wants leasehold,but some simply dont have the cash to buy it,or are dumb until the solicitor spells it out.In my daughters case the husband had moved in with a woman who was loaded and just wanted shot as his ex who was skint was in the house.Drop it on them a day or two before you complete though to naff up their chain.The beauty is the sellers know when you say oh its leasehold you mean it when you say im walking and the solicitor will explain to them it will likely keep happening.

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21 hours ago, durhamborn said:

I bought a leasehold house many years ago and so did my daughter.The knack is to keep quiet until your about to complete.Work out how much it will cost in two years time to buy the freehold (you have to wait  two years) and then drop it the day before you complete,oh im backing out its leasehold unless they drop the price by x amount.I doubled the cost of buying the freehold and got it knocked off then bought it two years later.£2k for freehold back then got £4k knocked off.My daughter did the same,£5k to buy freehold got £9k knocked off and then bought it.The sellers all know nobody wants leasehold,but some simply dont have the cash to buy it,or are dumb until the solicitor spells it out.In my daughters case the husband had moved in with a woman who was loaded and just wanted shot as his ex who was skint was in the house.Drop it on them a day or two before you complete though to naff up their chain.The beauty is the sellers know when you say oh its leasehold you mean it when you say im walking and the solicitor will explain to them it will likely keep happening.

You mean exchange - not complete?

Anyway, I'd just tell you FO and resell at a bigger discount knowing that your time and costs had been wasted. There's being hard nosed but fair and then there's this. 

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7 hours ago, micawber said:

You mean exchange - not complete?

Anyway, I'd just tell you FO and resell at a bigger discount knowing that your time and costs had been wasted. There's being hard nosed but fair and then there's this. 

Worked for me and my daughter,only costs were a survey,people in chains in a slow market like the north east know it could be 6 months before they sell again.Its always worth doing a bit of research on the seller.A divorce where the hubby earns a packet and has ran off will usually see them accept a much lower price,he just wants out asap.We were fair.They could of said no and sold to someone else.The fact they accepted shows they knew very well the lease is a problem and hoped to pass it onto someone else.They should of bought the freehold before they decided to sell.

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  • 238 Brexit, House prices and Summer 2020

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      • down 5% +
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