In July 2017 the Government vowed to put an end to poor leasehold practices by promising to ban the sale of new-build leasehold houses. While this has yet to be enshrined in UK law, in June 2018 the the Secretary of State for Housing, James Brokenshire, announced that housing developers would no longer be able to use any new Government funding schemes for unjustified new leasehold houses.

A new report from the National Association of Estate Agents shows that an estimated 1.4 million homeowners live in leasehold properties and that almost half of those did not realise that they would not own the freehold until it was too late. There is a real problem with homeowners being trapped in a property that they cannot afford and cannot sell; nearly half of the homeowners interviewed did not realise that ground rent would increase or escalate. Almost everyone interviewed for the report regretted purchasing a leasehold property.

In a leasehold flat or apartment, the service charge may cover maintenance of communal hallways, cleaning, and fixing things like guttering, roofs or building management. However, in leasehold houses, there are unlikely to be communal areas inside the property and instead the service charge will usually cover the maintenance of outdoor communal areas. More than half, some 51%, of those living in leasehold houses therefore feel that alongside council tax, they’re paying for same thing twice.

The report suggested that developers and builders see leasehold properties as a “cash cow”, reeling in first time buyers and those with lower incomes with lower up-front prices, using the leasehold status as a mechanism to offset costs by increasing ground rent and other communal costs. Worryingly, buyers seemed unaware that they were signing up to these terms, perhaps indicated by 65% of those interviewed for the report using the solicitor that the house builder recommended with 78% of home owners interviewed dealing with the house builder or developer directly without an agent and therefore not bound by regulations involving estate agents.

According to Katrine Sporle, The Property Ombudsman, the findings of the report are ‘a scandal’. ‘New build homes are not currently covered by an Ombudsman which means many consumers who feel like they were missold, or are facing issues, have nowhere to go to seek redress,’ she said.

“The scale of this issue has never been brought to light before” writes Mark Hayward, Chief Executive, NAEA Propertymark, in the forward to the report. “This report serves to highlight just how restrictive the terms on many leasehold houses are, the extent to which consumers feel that they have been cheated and what those that are impacted would like to see happen. We have created this body of evidence to support those that are working on leasehold reform to ensure that ultimately leasehold homeowners are treated transparently and fairly going forward.”