Leasehold Homes Scandal
There has been much written about the ‘leasehold homes scandal’ over the past 12-18 months and, while we have Government movement in terms of stopping future sales of leasehold homes, this might be seen as cold comfort for those for whom such legislative changes are too late.
On the positive side, even before the Government intervened, the vast majority of developers had stopped this practice but those who had already bought leasehold houses are not so fortunate.
In terms of their ability to purchase the freehold, in terms of their ability to sell, in terms of their ability to remortgage, in terms of their ability not to have a doubling of ground rent every 10 years, in terms of their ability not to have onerous terms in the leases, many existing leaseholders are currently snookered and one can’t help feel that this is an area which is going to require further Government intervention.
For what it’s worth, in our discussions with Government stakeholders and policymakers, we have been encouraged by the positive noises coming back, and of course there are a number of consultations ongoing, which we have taken a full part in, and which I understand the Government is waiting on before further decisions are made.
Which is why the recent comments made by Housing Minister, Heather Wheeler, to the recent HCLG Select Committee might have been somewhat surprising. Wheeler appeared to suggest the Government would prefer agreement to be reached voluntarily between developers and leaseholders, that the problem affects far fewer people than pressure groups suggest (12,000 as opposed to 100,000), and that any fresh legislation in this area would not be welcomed because it would trigger “horrendously expensive” compensation claims.
It was also suggested that this problem had been caused by excitable individuals “caught up in the moment” signing leases simply because this would expedite the purchase. The inference appeared to be that these people were in full provision of all the information and they just did it anyway. We would respectfully disagree.
We carried out a Homebuyer Experience survey last year, and it was clear from the responses we received that this is by no means the full story.
For instance, when these buyers were asked when they received all the information they believe was vital to their decision to make an offer – such as whether the property was leasehold, when they might be able to purchase the freehold, the years remaining on the lease, who the freeholder was, whether the developer planned to sell it on, whether they had first right of refusal, ground rent levels, and everything you would want to know – the vast majority said it was not only after they had already put their offer in, but in many, many cases, they did not know until well into the conveyancing process and at the point of exchange of contracts, by which time they were financially and emotionally committed.
Almost every single individual who completed the survey said they believed they did not have all the information they required to make an informed decision about buying the property, before they put an offer in on the property. This is a significant breach of the Consumer Protection from Unfair Trading Regulations (CPRs) by developers and/or agents.
During the Select Committee meeting it was suggested that the problem is simply down to individuals overlooking the small print within contracts. If developers and agents were meeting their responsibilities in terms of providing all the required upfront information to potential purchasers at the outset, then at least these individuals would have been fully informed. It’s this breach of CPR which means the individuals weren’t aware, plus there should not be any onerous terms in the ‘small print’ in any event.
But above all of these arguments, surely the greatest is that the seller of these properties should not have been requiring terms so onerous that many of the top ten mortgage lenders will not lend on them?
And just to put this into context, according to the many trapped leaseholders I have heard speak at events, these were not buyers frivolously ignoring the advice of their conveyancer; these were people only able to afford to buy their own home by using the Government’s Help to Buy scheme and trapped into accepting the onerous leases because the developers simply were not marketing any properties freehold in their area.
The leasehold team at MHCLG has been working hard to come up with workable solutions along with other stakeholders who are seeking to rectify the issues currently facing existing leaseholders. We hope to have the opportunity to meet with Heather Wheeler, who spoke very encouragingly at the CLC Conference last month, to champion the case that leaseholders, who either never understood they would be in such a position, or had no choice, should get the legislative help they require to make this right. We will certainly continue to fight and lobby for these solutions.
Beth Rudolf is Director of Delivery at the Conveyancing Association