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TODAY'S OTHER NEWS

Leasehold scandal continues - almost all buyers regret their purchase

Almost all buyers of new build houses who purchased a leasehold regret doing so, and the vast majority say they definitely wouldn't buy another leasehold property in the future.

These revelations come as part of a damning report into the leasehold sector by NAEA Propertymark, which suggests thousands of new build owners are stuck in houses they cannot afford to continue living in and are unable to sell.

The study, which spoke to over 1,100 owners who only bought the leasehold on their house, found that almost half didn't know they were only buying the lease on the property until it was too late. 

Alarmingly, almost 60% of participants said they didn't understand what being a leaseholder meant until they had purchased the property. 

Some 48% say they were unaware of escalating ground rents when they bought the new build property and 62% say they feel like they were mis-sold a home.

The majority of these owners (78%) bought their leasehold home directly from a new build developer, with 65% using the solicitor their house builder recommended to them.

More than one in ten claim they were not told they were buying a leasehold rather than a freehold by a professional, having to find the information in the contract themselves.

As well as escalating ground rents, one of the biggest problems for leaseholders is having to seek permission, and often pay, to make cosmetic alterations to the property.

According to NAEA Propertymark's findings, new build leasehold owners were typically charged £1,422 to install double glazing, £887 to change kitchen units and £689 to replace flooring by the freeholder.

These issues make it much harder for people to sell their homes in the future, with 31% of those surveyed saying they are struggling to attract a buyer because they don't own the freehold.

A quarter of those looking to sell said when interested parties found out the property was being sold as leasehold, they didn't follow up their interest.  

For those buying leasehold houses as opposed to apartments or flats, there are unlikely to be indoor communal areas covered by a service charge. Therefore, many of the leasehold house owners surveyed said they felt their service charge rendered them paying for the same thing twice alongside council tax.

Those affected by this issue said they would like to be able to buy their freehold at a fair price or see legislation passed that renders all existing leaseholds null and void. Consumers also called for an investigation into unreasonable or unlawful leasehold sales.

"Those who buy a newbuild are often under the impression that buying something brand new means it will be perfect, but unfortunately that isn’t the case and most buyers have no idea about the trappings of a leasehold contract until it’s too late," says Mark Hayward, chief executive of NAEA Propertymark.

He references the government announcement in June which suggested that housing developers would no longer be able to use funding schemes like Help to Buy for unjustified new leasehold sales.

"This is good news for future homeowners, particularly first-time buyers," he says. "However, the challenge now is looking at what can be done to help those stuck in leases.”

Back in July 2017, the government launched a consultation period on banning unfair leasehold charges imposed on buyers of new build homes in England.

It has since said that it is working on initiatives to help leaseholders buy their freehold as well as making changes to ground rents on long leases.

However, at present, no timetable for when these measures will be introduced has been announced.

"If you buy a newbuild house, you’d usually deal directly with the developer’s sales team rather than an estate agent," continues Hayward.

"But sales assistants aren’t bound by the Estate Agents Act 1979, leaving buyers vulnerable and without protection, which explains why so many feel like they were mis-sold."

He says that the fact that so many buyers regret purchasing leasehold and wouldn't do so again in the future 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 concludes.

Poll: Does the leasehold system need drastic reform?

PLACE YOUR VOTE BELOW

  • Simon Shinerock

    Buying new is far from perfect, it can be great but it can also be a disaster for the unwary

  • Mark Wilson

    I would like to see this report as the conclusion look very suspicious. Who was in the sample?

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    Great to see NAEA confirming that basic lease information is likely material information under CPRs and should be provided to buyers at earliest opportunity. Their web site reads...

    “There is a level of responsibility at every level, whether you are an agent, mortgage lender or conveyancer, but as one of the first in a chain of people to interact with a customer, you should be providing at least a basic overview of the tenure and what this means for them as a buyer.” NAEA list the information that agents should provide.

    If 91% of leasehold house buyers (as opposed to flat buyers) regret their purchase, then lease information HAS to be material information. QED.

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    I wish your strapline made it clear you are talking of new build houses rather than say existing flats

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