Earlier this year, we saw the murky business of leasehold property contracts come under a harsh spotlight. It was revealed that certain homes have been sold as leasehold properties, with housebuilders then selling the freehold ownership to third parties without the consent (or even knowledge) of the homeowners.

Among the messy fallout, it’s become apparent that buyers have been given questionable information at the point of sale, and been deceived into paying exploitative fees to live in an unsellable property, where they have no realistic opportunity to purchase the freehold and resolve their problems.

These practices are nothing new, but part of the problem is that leaseholders understandably don’t want to broadcast a fact that severely damages the value of their property. As a result, the true costs of certain leasehold contracts have been kept quiet, and the traps have stayed in place.

Government Response

Nothing has yet been confirmed, but the Government has expressed intentions to prohibit the sale of new-build homes under a leasehold agreement. It has recognised that the practices creating a leasehold market do not work in consumers’ best interests, although it is not yet clear how current leaseholders – and those in apartment buildings – will be able to improve their situation.

It may be that process of leasehold extensions is made less expensive, perhaps by capping ground rent charges, or eliminating the “marriage value” owed upon extending.

If you’re buying a property:

Just because the property you are considering is a house doesn’t automatically mean you will be buying the freehold – make sure you are absolutely certain which you are getting. Variations may include a “share of freehold”, “commonhold”, or leaseholds where the ground rent is at “peppercorn” (zero).

If you are buying leasehold, make sure you fully understand the terms of the contract. The main thing to look out for is ground rent that double after a certain period of time, and whether the current freeholder has the right to sell the title off without your consent. Salespeople may not be upfront about this information (they may not know themselves), but your solicitor or conveyancer will be able to assist you.

If you’re selling a leasehold property:

Unfortunately for sellers, leasehold properties are going to be under harsh scrutiny for the foreseeable future. Buyers will now be more aware than ever about the ramifications of buying leasehold, and you can expect your contract to be thoroughly vetted before an offer is made on your home.

However, realistically, many properties in the UK are still leasehold, so try not to worry too much. Familiarise yourself with the facts of your home by checking how many years are left on your lease and making sure you understand the terms of your ground rent.

Speak to your solicitor and estate agent to determine your best course of action, and whether your current contract may inhibit a sale for the property’s full value. In some cases, it may be worth holding off until the Government’s plan becomes clearer.

In the meantime, do your utmost to ensure that your lease length doesn’t drop below 80 years. Extend your lease where possible, or try to make arrangements to purchase the freehold of the property.