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Scandal of Leasehold New Builds

(14 Posts)
Eloethan Mon 15-May-17 09:47:01

Yet another example of how working people are being misled and exploited by greedy speculators is the growing prevalence of new build houses being sold leasehold. Buyers are then subject to ground rent and other fees, e.g. a fee of £3,000 just to obtain permission to build a small extension. Personally, I think the whole system of leasehold should be abolished and replaced by something less feudal but this is a particularly awful example of how the system is being exploited.

Apparently some of the conditions applied to leaseholders (e.g. the doubling of ground rent every 10 years) have made their properties virtually unsellable. To add to that, some developers have sold on the leases to investment companies who then proceed to raise the cost of buying the freehold to extortionate levels. An example was given of the original cost of purchasing the freehold being around £7,000 rising to £45,000.

There is growing anger about these unscrupulous methods of extracting money from homeowners, and several publications have reported on the scandal.

www.theguardian.com/money/2016/oct/29/new-builds-house-buyers-leasehold-property-trap

www.constructionmanagermagazine.com/comment/hous7ing-wh6ite-pap9er-time-fix-leasehold-rip/

In any event, gransnetters and everyone else should be aware of the dangers of buying houses on newbuild developments so that they can warn their grandchildren or anyone else they know who may be considering such a purchase.

MawBroon Mon 15-May-17 10:06:25

Well said Eloethan I think I heard a piece on You and Yours flagging up the considerable dangers. Not like our day when only flats were leasehold and many of them either 999 years or easy to buy once you lived there.
This is an expensive scam.

Eloethan Mon 15-May-17 10:27:23

My hope is that everyone will talk about this new rip-off with their friends and families. More and more people will then be aware of these issues and will hopefully warn anyone they know who might be contemplating buying a newbuild house of the potential dangers.

angelab Mon 15-May-17 10:47:38

I completely agree Eloethan. It's not just the cost either, living in a leasehold property means, for example, that you may not be able to keep a pet. I naively thought before my house-hunting began that if you bought a flat, it was yours to do what you like with (within reason), but it has taken me literally years to find somewhere I could take my cat. Dogs I can understand because of the noise, but a cat?!

The point I'm making is, people may be warare of this type of restriction on a flat but never think it could be the case for a house. As you say - caveat emptor.

Eloethan Mon 15-May-17 11:28:40

angelab Yes, it's ridiculous that such developments can prevent white van owners from parking outside their own house or stop people from hanging out their washing.

janeainsworth Mon 15-May-17 11:59:57

I've heard about this too in You and Yours and it does occur to wonder whether the solicitors involved in the conveyancing realised the implications of the leasehold small print and if so whether they warned the purchasers, their clients.
I would have thought that a) they should have been aware and b) they should have made their clients aware and therefore c) they are guilty of negligence if they didn't point this out.

janeainsworth Mon 15-May-17 12:00:19

Occur to me

sunseeker Mon 15-May-17 12:05:07

I hadn't realised that new leaseholds were being introduced as I thought they were being phased out. Aren't leaseholders now allowed to buy the freehold - with the buy out cost capped?

sunseeker Mon 15-May-17 12:09:21

Just had a quick look on the internet and apparently there isn't a cap on the buy out cost. Developers appear to be selling these homes relatively cheaply and then selling on the leasehold to another company who charge an inordinate amount for the freehold. Well done, for posting about this and hopefully it will mean people will refuse to buy leasehold.

Tallulah57 Mon 15-May-17 16:40:27

Thanks for the information Eloethan really useful.

tanith Mon 15-May-17 17:20:13

Surely people are aware what Leasehold means when they buy, I'm just asking the question are they not understandin what it is they are buying?

janeainsworth Mon 15-May-17 17:55:06

I think the terms and conditions of these leaseholds are rather different from the traditional ones Tanith, as eloethan described in the OP, ie large increases in ground rents and high costs to purchase the freehold.

M0nica Mon 15-May-17 18:08:00

Tanith this is what has been puzzling me, also if lenders will not lend on these houses when they return to the market, why did they lend on them to the initial purchaser?

I think one reason is that purchasers often use the developers recommended solicitor, he knows what side his bread is buttered, so he is not going to make any big deal about the leasehold or the escalator for the ground rent, or should I say he will deliberately mislead the purchasers. He will just say that it is up to the buyer to read all the small print. But many of the purchasers are first time buyers and do not understand the niceties of house purchase.

DD has twice bought properties(not new ones) with leases and in each case the solicitor studied the lease carefully and brought to her attention all the key clauses. This has clearly not happened in these cases.

Frankly I think it is a deliberate con by the developers in collusion with lenders and the solicitors working with them. The developers get extra money for each house when they sell the lease on and more and ore money from those they have sold to, if they keep them.

However over the last 6 months there has been a lot in the media about this and most of the developers have now said that all future properties will be sold freehold, unless there are particular reasons where leasehold tenure is required and Taylor Wimpey (I think) have actually set aside money to help someof their buyers buy their way out of their leases

Grannyknot Mon 15-May-17 19:40:14

Tanith We were ripped off with leasehold charges/additional costs when we first arrived in this country. We had no experience of buying on leasehold and were badly advised... so it's not just friends and family that need warning, it's poor unsuspecting "immigrants" as well. (The inverted commas are because my husband was born here but left as a child).