19 Jun, 2018/ by Homeward Legal /Buyer, First Time Buyer, Sale & Purchase

Homeowners who have bought a newbuild property sold as leasehold are "tenants" in their own home. A major investigation by consumer watchdog Which? claims thousands are trapped in a home they cannot sell or make changes to without having to pay the freeholder.

Which? describes the situation as "fleecehold" and notes that critics of the leasehold system as it applies to newbuilds say it is "the PPI of the housing industry".

In England and Wales, property is sold as either freehold or leasehold. Freehold means you own both the building and the land on which it stands. Leasehold means you only own the building and lease the land on which it stands for a fixed period of time with the leaseholder paying an annual ground rent for the privilege along with maintenance charges that vary depending on the freeholder.

It's estimated there are around 4.5 million leasehold properties across the country, with most flats and apartment blocks leasehold properties.

£2k charge for building a conservatory

In 2017, the then-Housing Minister Sajid Javid announced a ban on the practice of selling brand-new homes as leasehold except in cases of shared ownership. Ground rent on new, long leases for both houses and flats will be set at zero.

However, that ban does not resolve the situation for thousands of homeowners who have bought a newbuild in recent years. Which?'s research revealed some of the charges imposed on leaseholders by the freeholder. These include:

  • £252 to have a pet in their own home;
  • £60 to change a doorbell;
  • £2,500 for permission to build a conservatory;
  • £300 for permission to put up a fence;
  • £295 annual ground rent doubling every 10 years, effectively rendering the property worthless to the leaseholder.

The Which? report says the leasehold system is one of "antiquated clauses, spiralling fees, greed from faceless investment firms and shoddy legal advice - all of which have contributed to the growing scandal rocking the property industry".

Despite impending legislation to outlaw the sale of newbuilds as leasehold, a ruling by the Court of Appeal in February in favour of a freeholder means existing leaseholders face spiralling costs and a diminishing asset in their property until the entire leasehold system is reformed.

Homeward Legal works with specialist property lawyers across England and Wales who are expert in dealing with leasehold property. Whether you're buying or selling a leasehold property, or looking to extend your current lease, talk to our team now to find out how we can assist you.

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