Angry homeowners have hit out at the property developer Bellway who they say “misled” them and “abused its position” when they were purchasing their homes.
The residents live on a new build estate of attractive three and four-bed homes in Formby, Merseyside. Their case has been taken up by Bill Esterson, Labour MP for Sefton Central and shadow business minister.
(Photo shows residents with Bill Esterson MP)
The properties were sold on 999-year leases and the residents each pay a yearly ground rent which increases with inflation. Homeowners must also pay fees to carry out improvements to their homes such as building extensions.
Although they can by law purchase the freehold after two years, many are worried that when the time comes it will be too expensive.
Unhappy homeowners on the estate, say they weren’t made fully aware of the implications of the leasehold. The freeholds have now been sold off by Bellway to a third party, which residents fear will make the freeholds even more expensive to purchase.
One resident, who preferred not to be named, said Bellway had acted in an unfair manner. She said: “To many of us owning a leasehold property was new and the implications not really completely understood.
“Many of us used the solicitor recommended by Bellway. They should have explained the implications leasehold properties had in more detail. But the solicitor just said ‘it was one of the best leases you could have’ and I trusted the solicitor’s judgement.”
Freehold
Homeowners have a right to buy the freehold after two years but uncertainty surrounding the cost means many on the estate want to buy it before the two years is up.
The resident said: “The worry is that if we don’t we will be priced out of buying our freehold altogether. Other people in the country have experienced this problem too but it seems to be a particular issue in the North
“It’s the general feeling that we have been misled by Bellway as they have acted in a unfair manner and abused their position as all this was not made clear from the beginning. All the companies are using immoral practices to ultimately make more profit.”
The area’s MP, Bill Esterson, has slammed this “legalised extortion” and has vowed to step in to help residents who feel trapped by their new build homes. He said the residents deserve protection from potentially unscruplulous and opaque ground management companies.
Esterson said: “I believe this is an issue the government should intervene on. Purchasers are being held to ransom. A Labour Government would end the routine use of leasehold ownership in new housing developments as this is nothing less than legalised extortion.”
He added: “I have written to the Communities Secretary Sajid Javid to ask what his department is doing to help people in this situation. Is the government more interested in boosting the profits of ground management companies or protecting homeowners from exploitation?”
Both Bellway and HomeGround deny they have done anything wrong.
Bellway response
A spokesperson for Bellway said: “We highlight where we are selling leasehold or freehold at the point of reservation.
“Purchaser’s solicitors will advise on the detail of the leasehold terms which are clearly and explicitly detailed within all contractual documentation provided to the purchaser. This includes the terms of the leasehold, as well as the ground rent payable and review frequency.
“In all circumstances, the purchaser will be advised by their solicitor who will act in compliance with Law Society and CML (Council of Mortgage Lenders) requirements.
“Bellway leasehold properties are typically for periods of 999 years with ground rent increasing by RPI which means that in real terms, the amount payable will remain the same value in future years.”
Fees
Residents on the Formby estate said the new ground rent management company, HomeGround , charges £108 to residents for simply enquiring about buying the freehold or making improvements to a property.
Depending on what works are being requested residents say they can be charged anything from £300 for changing carpets or laying laminate flooring, to £1,440 plus an unspecified landlord’s fee to build an extension.
Homeground response
HomeGround acts on behalf of the landlord, Long Harbour, which is an investment manager regulated by the Financial Conduct Authority.
A spokesperson for HomeGround said these are very long term investments held by institutional pension investors and the income from the ground rents rises in line with inflation over many decades.
Both firms also welcome the forthcoming consultation by the Department for Communities and Local Government into leaseholds as laid down in the Housing White Paper.
In response to the fee charging, the spokesperson said: “Under the legislation governing this sector HomeGround can only legally charge reasonable fees for responding to a leaseholder request to change a lease.
“Consents are written into a lease, which is agreed to by a leaseholder when they purchase it, to ensure the safety and integrity of the property, as well as to protect the rights and amenities of the occupiers of neighbouring properties.
“HomeGround strives to be one of very lowest chargers for such fees which cover the making of legally binding variations to property transactions, plus the quality of its work is also subject to the oversight of the ombudsman.”
“The HomeGround team is made of law graduates who are all overseen by a fully qualified property solicitor. The costs of the work they carry out compare very favourably with any fees charged by any firm of solicitors, even those outside of London.
“These fees, if they are not considered to be reasonable, can be challenged by a simple application to the specialist independent First Tier Tribunal should a leaseholder believe they have been unreasonably charged.”
Level of service
Unlike with blocks of flats, the legislation does not give leaseholders of a house the first right of refusal (at the market price) if the freeholder wishes to sell it on to another third party. All leaseholders however are notified when the freeholder changes.
Any leaseholder who is unhappy with their quality of service and responsiveness can ask the Ombudsman Redress Scheme to independently look into their complaint.
Consent fees
When a leaseholder wishes to make changes to their leasehold property, they must apply for changes to the terms of their lease, which involves alterations to a legally binding property contract.
The fees have to be reasonable and HomeGround refutes the quoted fee above of £1,440 and says its fees range from £50 to check whether a householder can keep a pet to £360 for alterations to a full licence. This relates to structural or extensive changes, where a surveyor and/or solicitor needs to review the plans and documents.
The £108 mentioned above is the administration fee for when a leaseholder applies to carry out alterations. They must complete an application form and give details of the works proposed. The fee covers checking the lease against the details of works and whether a surveyors report is needed or of a formal licence needs to prepared by the landlord’s solicitor.
Physical alterations to leasehold properties may be restricted by planning permission or regulations. For example, issues which cause particular concerns for neighbouring properties can include noise nuisance, such as where a flat owner replaces a carpet with wooden flooring without proper sound insulation; or where a leaseholder sublets, particularly on a short term holiday basis, which can mean a high turnover of visitors at a property.
Any other sums on top of this would be for professional fees incurred by the landlord, such as solicitors and surveyors fees. HomeGround says it does not request premiums for extensions or other alterations to leasehold houses, however, the landlord is perfectly entitled to do so under the relevant legislation.
HomeGround also said it would be unusual for a carpet replacement to require consent, unless this involved replacing carpet in a flat with another material, such as wooden flooring.
The spokesperson said: “In such a case the landlord needs to ensure that appropriate steps are taken to prevent unreasonable noise and impact on other residents, and therefore there is a need to check and approve the proposals for replacement. Usually this would be done by way of a Letter of Consent at the lower fee of £300.”
I was charged £120 by them to change my mortgage provider. I received no correspondence from them so I don’t know what the charge was for- they are a terrible company to deal with, want payments in advance and don’t care if you are experiencing financial difficulty.