News coverage about a growing number of house buyers being trapped by spiralling ground rents has apparently led to leasehold reform becoming the number one concern for the nation’s property owners.
A series of stories in the media have raised awareness about the problems of homeowners being trapped in properties that are effectively unsellable.
Some mortgage companies are now refusing to lend against homes with onerous ground rent clauses, while other buyers have been stunned to discover that their freehold has been sold on to a company demanding sizeable sums to buy them out.
These concerns seem to have been heeded as the Government announcement on 25 July 2017 that developers, such as Taylor Wimpey, will no longer be able to sell houses on a leasehold basis will be welcome news for future house buyers. However, this proposed change in the law will not help those who already own leasehold houses and may well create an underclass of existing leasehold houses that will stand out even more once this change comes into effect.
In the meantime, owners of leasehold property with onerous ground rents that double every ten years, who bought from Taylor Wimpey should waste no time in applying to Taylor Wimpey’s assistance scheme, in order to hopefully get their ground rents reduced.
Other freeholders, such as Martin Paine (who with his wife Anne Kirmond owns Circle Residential Management Ltd, Chamber Estates Lt and Mercia Investment Properties Ltd) have announced that they will be adopting a more ethical approach to charges. It is unclear whether this means that these freeholders will no longer continue to insert onerous ground rent clauses into property leases at every opportunity.
These clauses double the ground rent every ten years without limit which can result in ground rent payable for a modest flat reaching over £1,000,000 per year. The clauses may also link ground rent to “rentable value” which when coupled with a ten yearly doubling clause may result in the ground rent rising to over £10,000,000 per year! Many of these ground rent clauses are camouflaged in order to catch out the unwary. Other freeholders such as companies, such as Long Term Reversions Ltd and Pier Management Ltd, in the Regis Group Plc, are also using ten year doubling ground rents to generate huge future ground rents and at the same time make flats subject to these astronomical rents potentially worthless.
If you are buying leasehold property it is therefore essential that you get your conveyancing solicitor to check the lease carefully.
If you believe that you were not properly informed about the potential risks relating to ground rent clauses you may have grounds to make a professional negligence claim. For guidance please contact Graham Balchin.