Q. I am in the process of buying a Leasehold property and my solicitor has just flagged up that the ground rent doubles every decade. I’m guessing in the short term this won’t cause much of an issue when selling on, but do you think it could potentially put buyers off in the future, I always thought of ground rent as a nominal amount?
A. Of course this is definitely a concern so consideration should be taken as to when you may sell; if you are in this for the long haul then it’s likely this will have an impact on a future sale. The abuse of the leasehold system is now prevalent in newly built homes. Recently branded as the PPI of the house building industry many homeowners are now coming forward, calling for compensation and asking for government involvement. Several of the market leaders when it comes to new development have been accused of trapping buyers into leasehold contracts that have spiralling ground rents which render them almost impossible for homeowners to sell on. Homeowners are finding that their leases were created, in some cases, years before their build was even completed and the freehold had been sold within two years of the lease being created. This is all before the buyer has even taken possession of the property. And the problems only escalate from there, reports are now circulating that some banks and building societies are refusing mortgages on properties with onerous ground rent clauses. Buyers looking at securing new build properties in particular needs to exercise some vigilance surrounding this given most developers offer no prominent mention of leaseholds or ground rents on their websites or in their brochures with many potential buyers alleging they are not told about the leasehold until late in the process. MP’s have now flagged this issue with the Prime Minister so hopefully this will be stamped out quickly before it gets out of control. Particularly be cautious when considering buying a house which most would automatically assume would be a ‘Freehold’ concern. According to government figures, around 6,000 new houses were sold as leasehold last year with many developers now regularly selling estate houses as leasehold. It is clear the system is being abused to drive huge profits at ordinary homeowners’ expense so do make sure that you are fully aware of all the terms prior to securing a property or regret it later