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Leasehold: The single word that can mean the end for a property purchase and why it matters so much; Millions of people live in leasehold homes - and it could become a rather large problem. Dean Dunham explains why and how it's changing.

Byline: Dean Dunham

If you are thinking of buying a leasehold property, read on and think twice.

When a house is sold as leasehold, the ground it is built on or some other part of the property remains in the hands of the freeholder.

So in addition to paying for the leasehold property the home buyer also has to pay an annual "ground rent" to the freeholder.

Developers set ground rents at a relatively low level but insert additional clauses so it increases drastically in future. Campaigners say ground rents could hit [pounds sterling]10,000 per annum on a three-bed leasehold property by 2060.

Leasehold property owners must ask the freeholder for permission to make certain alterations or carry out building works (for example to build a conservatory), often for a hefty fee.

Because of the issues above, leasehold owners can find it difficult or impossible to sell.

Consumer rights

A less well known side-effect of increasing ground rent relates to the status of the lease in housing law.

If the yearly ground rent exceeds [pounds sterling]1,000 in Greater London or [pounds sterling]250 elsewhere and the tenant occupies the property as their home (as opposed to renting it out as an investor) then the lease becomes an 'assured tenancy'.

This makes the property even more undesirable. For example, if you fail to pay ground rent under an assured tenancy the freeholder can seek a possession order, and neither the leaseholder nor the mortgage lender can simply pay the arrears to rectify the issue.

If it's not an assured tenancy and the freeholder pursues you for unpaid ground rent, simply bringing the arrears up to date will stop the action.

Housing

There is no law against unfair ground rents or unfair terms in relation to freeholder consents.

However, the law protects buyers from being misled at the point of purchase. The Consumer Protection from Unfair Trading Regulations 2008 says estate agents and sellers must provide 'full disclosure' of material information.

This means making sure that the buyer is fully aware of what the terms are in relation to ground rents and freeholder consents and what these will cost at the point of purchase and beyond. Buyers who feel that they did not receive such disclosure may have a claim.

The Government has indicated it will set all 'new' ground rents at a notional sum although this has not yet materialised.

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Credit: PA

Definitely not that one

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Title Annotation:Money
Publication:Daily Mirror (London, England)
Date:Jun 10, 2018
Words:411
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