An estimated 1.6m people live in leasehold properties they do not legally own outright, says HomeOwners Alliance.
What’s the latest?
More than one million homeowners are being 'held hostage' by unscrupulous leasehold practices, according to a report by the HomeOwners Alliance.
An estimated 1.6m people live in leasehold properties they do not legally own outright, even though they think they do.
They are also subjected to unfair practices, increasing ground rents and excessive maintenance fees, the group added.
And those with less than 80 years left on their lease collectively face an eye-watering bill of £4bn to have them extended.
A period of less than 80 years is generally the point at which estate agents and mortgage lenders consider the length of a lease will adversely affect the value of a property and its mortgageability.
Why is this happening?
HomeOwners Alliance said many people were ignorant about leaseholds.
The situation is being made worse by the fact that many estate agents themselves do not understand leaseholds properly and are failing to warn their clients.
It added that leaseholder ownership could be traced back to the Domesday Book and it was time it was relegated to history.
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Above: two-bedroom flat for sale on Town Hall Road in south west London
Who does it affect?
The situation means some people with leasehold properties may find they are unable to sell their home when they try to put it on the market if their lease has less than 80 years to run.
Nearly half of leaseholders also said they had encountered a problem with their freeholder, with the most common compliant relating to high management fees for maintenance and repairs, while others had had disputes which had reduced the value of their property.
Home ownership officially stood at 64.6% in 2014, according to government figures. But the report said the UK’s true rate would plunge to just 58.9%, a level comparable with the early 1980s, if the issues with leasehold properties were factored in.
Sounds interesting. What’s the background?
The report, called 'Homes Held Hostage', also uncovered widespread confusion among owner-occupiers in leasehold properties.
Only 58% of leaseholders said they knew the length of their current lease, and among those that did almost a quarter said it was less than 80 years.
The average cost of extending the lease on a flat is £10,876, but this assumes the lease still has 80 years to run. If it has less time, the cost of renewing it is considerably higher.
HomeOwners Alliance is calling for the Government to reform the whole leasehold system and commit to scaling it back.
It also wants the creation of new leasehold houses to be outlawed, and for it to also be made illegal for freeholders to double ground rent.
Other recommendations include making commonhold the mandatory tenure for new-build flats, and making leasehold extensions at least 250 years long with peppercorn rents.
Paula Higgins, chief executive of the HomeOwners Alliance, said: “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.”
Top 3 takeaways
- An estimated 1.6m people living in leasehold properties do not legally own their homes, even though they think they do.
- Those with less than 80 years left on their lease collectively face an eye-watering bill of £4bn to have their lease extended.
- The average cost of extending the lease on a flat is £10,876, but this assumes the lease still has 80 years to run.
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