A law firm announced last month that it is preparing to launch a group negligence action against conveyancing solicitors working for housing developers and purchasers of new build leasehold housing.
What's the problem?
Lease owners who are often not the original property developer but a freehold management company of some sort, that have bought the freeholds from the developer due to their inherent value, are taking advantage of what are considered to be unfair and tedious terms in the lease agreements.
The leases themselves have been criticised for their complex and often unclear terms which have put leaseholders at a clear disadvantage due to the doubling ground rent provisions and other onerous terms relating to improvements and alterations.
How bad are some of the terms?
By way of example, ground rent of £290 on a leasehold house purchased for £100,000 would double every decade on the remaining 999 year lease, taking the ground rent to over £1 Million in just 120 years. Ground rent should typically be a nominal amount that rises with inflation.
Freehold management companies are also demanding excessive amounts of money for granting permission to undertake works or to make alterations. Some examples have included £300 for new carpets and £5,000 for a new conservatory!
As a result, homeowners have seen the value of their properties fall (even to £0 valuations) and many have had difficulty selling. Attempts to purchase the freehold of their homes have been hit with extremely high valuations.
Taylor Wimpey has set aside a £130 million to settle ground rent disputes on leasehold properties.
House builder Taylor Wimpey is rightfully doing something. It has been transparent over this issue, set aside funds and entered into negotiations with the freehold management companies that it transferred the freeholds to in respect of the doubling ground rent leases. Other developers should follow this example before the issue becomes a national scandal and impacts market confidence.
Other developers should follow this example before the issue becomes a national scandal and impacts market confidence.
The issue for conveyancers working for developers and purchasers of these new build leasehold properties.
This issue was recently debated in Parliament and described, amongst other things, as the “PPI of the house building industry”.
If residential conveyancing solicitors failed to adequately warn buyers of onerous ground rent and others unfair lease terms they can expect to receive a negligence claim. Apparently, over 600 clients have signed up thus far to the action mentioned at the beginning of this article, mainly in the cities of Manchester, Liverpool and Newcastle.
If you are a planning to purchase a new build property or have already and are concerned about the terms of your lease agreement, please contact the author for support or submit an enquiry via our contact page.