What is a leasehold property trap?
When looking to purchase a property, most of us know whether we wish to purchase an existing build or opt for a newly developed, brand new home. The appeal of 'character' is what draws many buyers to purchase a property already in existence, however, many decide that a fresh canvas is just what they are after.
With new build properties, many developers are selling with a leasehold tenure. Further down the line, once the purchase transaction has completed, owners then consider buying the freehold (for reasons such as making the home easier to sell in the future) but they are coming across huge problems in doing so because many developers have already sold the freehold to another company.
Here's an article the provides an example of this situation.
The new-builds catching house buyers in a leasehold property trap
When Clare Budgen bought her first house in Ellesmere Port in 2009 for £155,000 the last thing on her mind was the lease. Taylor Wimpey, the developer, arranged the lease on a 999-year basis, so what could the then 22-year-old possibly have had to worry about?
What are the hidden costs to look out for when considering a purchase?
Although Ground Rent is not necessarily a 'hidden' cost, what appears to be the problem is that these properties that would have been previously sold as freehold are being sold as leasehold, and within the Lease there are clauses that make it allowable for ground rent to make a dramatic increase later on down the line. Therefore, on initial inspection, the rent appears affordable but is likely to escalate dramatically.
What is being done to address the problem?
Plans are being discussed and hope to be put forward for a leasehold reform later in 2017 by Housing Minister Gavin Barwell with the support of The Conveyancing Association, who are no stranger to putting forward their views on the issue of leasehold reform.
If you already own this type of property, how does it impact a future sale?
The issue surrounding the lease is causing great concern and having a significant impact on the sale of this type of property. Potential buyers are becoming more aware that should they wish to sell the property in the future, the large increase in ground rent could result in their home being unsaleable.
Are lenders refusing to make mortgage offers?
Some lenders will not provide potential borrowers with a mortgage offer when purchasing this type of tenure because may of the original leasehold agreements include a clause where the owners will be liable to pay ground rent to the freeholder that will increase rapidly.
How can a solicitor help you to buy the Freehold?
If you are considering purchasing the freehold to your leasehold property, or you are thinking about purchasing a leasehold new build, our team of specialist consultants are here to help. Contact us for more information.