Leaseholders own their homes for a fixed period of time on a lease to a freeholder but many have long leases and experience no problems.
A lease is a written document containing clauses that govern the parties’ respective obligations including the ground rent when it is due and how much it should be.
In recent years there has been the phenomena of new build housing being sold on a leasehold basis where the lease contains terms that are heavily onerous. In particular, there are clauses that cause the ground rent to rise steeply over time.
Again purchasers of some new build homes have found clauses in the lease meaning that they can be charged an extortionate amount for the freeholder’s approval for basic work such as putting in decking in the garden.
Other clauses demand payment upon a re-mortgage taking a percentage of the value of the property.
These clauses not only cause hardship but blight the property and in some instances make it impossible to sell the property.
Clauses such as those that allow ground rent to double every 10 years may not sound too onerous but the ground rent could rise and dramatically add up after so many years leaving the householder stranded.
Doubling ground rent terms are often buried within the lease agreement with lenders, borrowers and their advisers only coming across them after completion. It is not uncommon for a ground rent to reach £10,000 a year by 2060 for a two-bed flat in one of these new build properties.
The government is proposing to reform property leasehold arrangements to outlaw this and some building societies such as the Nationwide refuse to grant mortgages on a new build lease with unreasonable ground rent terms but that is of no help to those that have already bought.
If you feel you have not been properly advised following the purchase of a new-build home and wish to discuss the same please contact Joseph Quinn on 01392 248858
This article is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such.