A new report has revealed the shocking extent of how the leasehold system is turning the dream of owning a home into a nightmare.
The HomeOwners Alliance said that many leaseholders are being held hostage by landlords charging exorbitant fees and face punitive restrictions that deprive them of many of the rights of home ownership.
There are currently around 1.58 million leasehold owner-occupiers in the UK, who in the in the eyes of the law do not truly own their own home.
Only 58% of leaseholders questioned said they knew the length of their current lease.
Of those that were aware, 24% – around 370,000 – said that they had under 80 years left on their leases before they revert back to the freeholder.
Analysis of these figures suggests that over £4 billion will need to be paid by leaseholders to extend these leases over the coming years.
As the cost of extending a lease can run into tens of thousands of pounds, many cannot afford to do so and therefore risk financial ruin or potentially losing the roof over their head.
Another problem is that agents and mortgage lenders typically view the 80 year mark as the point at which the lease begins to adversely affect a property’s value and mortgageability.
So when the lease period falls below 80 years it can become very difficult to extend the lease or buy the freehold.
Properties can also be more difficult to sell due to the problems of getting a mortgage making them less attractive to prospective buyers.
If the number of leaseholders was included in official government figures, the true rate of homeownership in the UK would plummet to just 58.9%, a figure comparable with the early 1980s.
The number of new leasehold properties has grown dramatically over the past 20 years. Since 1996, the percentage of new-build registrations with the Land Registry for leasehold tenures has grown from 22% to 43%.
This is largely due to the growth of newly-built flats and houses sold as leasehold by developers – a practice almost unheard of 20 years ago.
The HomeOwners Alliance is urging the government to do more to protect people by outlawing the creation of new leasehold properties.
Paula Higgins, chief executive of the HomeOwners Alliance, said: “Leasehold ownership can be traced back to the Domesday Book and it is a practice that should be relegated to history.
“Unscrupulous and avaricious actors within the property industry are using sharp leasehold practices to line their own pockets and fleece householders. Developers and estate management companies rely on leasehold to bamboozle consumers, charge exorbitant administration fees, ever increasing ground rents and render properties unsellable.
“The situation is exacerbated by the fact that many estate agents are themselves ignorant about leasehold and fail to inform and educate their customers properly. The government needs to take urgent legislative action to protect people from these practices, help people who are already trapped and avert a full-blown crisis. Our report highlights the problems and makes a series of simple and sensible recommendations that could be introduced.”
Labour’s shadow housing secretary, John Healey said: “This report shines new light on the difficulties faced by some home-owners who own their home on a leasehold basis – often in the dark about the exact terms of their lease and currently unprotected from punitive terms including huge rises in rip-off ‘ground rents’.”
Further research showed that less than half of adverts on popular property websites were clear as to the correct tenure of a property.
Only 49% of flat listings specified whether the property was a share of freehold or a leasehold property, while just a quarter of the listings (24%) were specific about the length of time left on the lease.
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