An all-party parliamentary group of almost 60 MPs and lords is to look into growing problems associated with leasehold properties amid allegations that the system is being abused and buyers of new-build homes in particular being exploited.
An increasing number of buyers of new houses, flats and sheltered homes for the elderly in England and Wales have been caught out by developers selling homes as leasehold when they previously would have been freehold.
The buyers are initially reassured by being given long, 999-year leases but when they enquire about buying the freehold later, find it is prohibitively expensive.
Alarming examples include:
Escalation in ground rents
Historically, annual ground rents on properties with a long lease were low, often around £5, so there was little value in reversion to freehold.
But now ground rents are much higher, often around £300 a year, with a contract saying this will double every 10 years – valuable income for the company that buys the freehold.
Justin Madders, MP for Ellesmere Port and Neston, has called for a ban on leasehold for estates of houses. He said: “It is clear this system is being abused to drive huge profits at ordinary homeowners’ expense. There is no need for there to be leasehold properties, particularly those on an estate where the properties are mainly detached houses.
“They need to be banned – it may be a convenient way for developers to get extra profit from their building work, but once they get in the hands of these private equity companies the profit motive overrides any considerations that there are real people living in their homes, who are being asked to stump up eye-watering sums.”