Following the Help to Buy scheme, many builders started selling houses on a leasehold basis when in the past, homes had always been freehold. Over time this became a debatable topic at which the Government felt the need to intervene.
In the eyes of many, some of the country’s housebuilders were putting profits before their social conscience. Whilst aware that they need to build homes for families, they still have shareholders to please with their work7.
The media made it no secret when they publicly stated that there was a situation with land banking. A real estate investment scheme, Land Banking is where someone buys large blocks of undeveloped land with the idea of later selling the land at a profit when development has been approved.
In some cases, builders have inherited land into their organisations thanks to consolidation. This is on a leasehold basis. It’s a debatable topic that they offer both leasehold and freehold properties for sale so that buyers can make their own choice based on their options.
Many First-Time Buyers in Newcastle, Home Movers in Newcastle and more had felt that the market had gone too far in the direction of leasehold when it came to light how much money the Builders had been earning off the back of the leases.
Things became even more strained when the Chief Executive of one of the UK’s most prominent Builders received a massive £100m+ bonus. At the time, this was one of the largest bonuses paid in corporate history.
Understandably so, some Leasehold Homeowners were shocked when they were being quoted thousands of pounds in fees when they requested permission to make internal and external changes to their properties.
The fees were being charged by their Leasehold Management Companies.
Some of the annual ground rents were set to double every ten years. Owners could realistically see that once these increases had kicked in, selling their home in the future would be more difficult.
After speaking with their MP’s and getting the subject debated in Parliament, the Government agreed that if you were purchasing a house (flats or apartments don’t count), then it is reasonable that you should own the freehold.
If you own a leasehold house, you should absolutely know you have one. Some however, are completely unaware that this is the case. If you feel that the Solicitor you went with did not give you the full facts about the lease you signed, you should re-contact them immediately and start looking into why this was the case.
The freeholder can be contacted at any time if you are looking to buy it from them.
In addition to leaseholds, there is the problem of service charges.
When Councils gives permission for Housebuilders to build on their land, they don’t always agree to adopt the common areas such as grass verges or roads. That means that the upkeep of these areas will need to be outsourced and this usually falls with private companies.
The owners in the area then make a financial contribution to this maintenance work on top of their council tax, this can happen regardless of whether the house is leasehold or freehold.
Service charge costs can increase. Sometimes the residents in the area collectively group up to form a local association which might allow them to choose a different service provider.
If you are interested in buying a leasehold property, please seek advice from your Solicitor regarding the lease.
It’s straightforward to get carried away with the excitement of purchasing a home, but you also need to realise it’s a significant investment decision that you need to think about long and hard.