Sentinels Solicitors

Consumer and Injury Specialists

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Leasehold problems

For most people the biggest financial purchase is a house.  Many people who believe they have bought the house they live in actually only own the leasehold.

Leases are a form of ownership but not the same as owning the freehold.

Owning the freehold is owning the building and the land it is built on.  Owning the leasehold is having a legal right to live in the property for the length of the lease but after that time the building and land is transferred back to the owner of the freehold.

Older very long leases eg 999 years and can easily be passed on to future generations or sold.  In many cases this is not a lot different to owning the freehold.

It would be very different if the lease was only 99 years or 150 years as the number of years left to run will likely affect its saleable value.

Your solicitor should advise you whether you are seeking to buy a leasehold or a freehold and the risks of each.

The fact that someone else owns the freehold may not affect you but you may have to pay something called a “ground rent” each year.  The longer the lease the more likely the ground rent would be very small (originally it might have been a “peppercorn”).

More modern leases in newer homes the housing developer/freehold owner sells the leasehold but inserts clauses into the lease that could cause problems.  Eg allowing the ground rent to be increased (often doubling every 5 or 10 years) or some other charges to be made to the leaseholder.  Even when the leases are long ones of say 999 years that would previously have been attractive to buyers if there is a ground rent clause allowing the ground rent to double every few years (even if this starts at a modest level of say £100 it can quickly become huge) this can have a dramatic effect on the value of the property and its re-sale value.

Solicitors should alert you to these problem clauses and the house builder/freeholder should disclose this information before you buy.  However, the housing companies who are selling the houses have been criticised by MPs for putting pressure on buyers to use their panel solicitors who may not take as much care of your interests as they ought.  In one case where the buyer insisted on using his own solicitor the sale of a property was dragging so much (due to the delays in the housebuilder providing information) the independent solicitor acting for the buyer said the purchase would go through quicker if the buyer used the housing company’s panel solicitors.  In other cases buyers are offered incentives to go with the housebuilder’s choice of solicitors such as free carpets, lawns or other discount.

Panel solicitors may not always be bad and may be cheaper but if you have found you have bought a lease with a problem clause and your solicitor did not draw the clause to your attention you may have grounds to complain and possibly claim compensation.  I have mentioned ground rents but there are often clauses that require permissions for things like building an extension, conservatory or even re-mortgaging or painting the front door and impose a charge for getting those permissions from the freeholder.

The housing company then often sells the freehold interest on to other companies.  In many cases they will offer to sell the freehold to you as leaseholder but at a vastly inflated rate running into £000’s.

There are several groups campaigning for changes to the leasehold sector some like the National Leasehold Campaign would like to abolish leaseholds in residential property.

The current government is consulting on unfair practices in the leasehold sector and we await the publication of its report with interest.

If you have problem clauses in your lease and wish to explore your rights talk to us.  You may have a right to claim some compensation from your former solicitor.  Call Nick on 01925 759 510.

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