When buying a property, if you purchased the leasehold, as opposed to freehold interest, you need to check the terms of the lease. Your lease may contain clauses which allow the ground rent to double every 5 or 10 years. This can potentially leave your property unmortgageable, making it very hard to sell and significantly reducing its market value.
If you were not advised by your conveyancing solicitor that your lease contained a doubling ground rent clause, then you may be entitled to compensation from your solicitor.
Claiming compensation for a mis-sold leasehold can be complicated, with few conveyancing firms willing to admit liability upfront. Our highly experienced litigation team can review your case and give you clear advice on whether you have a realistic chance of a successful claim. We can then guide you through the whole claims process with the aim of getting fair compensation as quickly and easily as possible for you.
By preparing your claim correctly and taking a firm but reasonable approach, we are typically able to settle leasehold mis-selling claims through a voluntary agreement with the conveyancing solicitor who handled the sale. This can get you compensation faster, at lower cost and with a lot less hassle.
If you believe you have been mis-sold a lease, we strongly recommend contacting our team today to make sure you do not miss out on any compensation to which you are entitled.
Common questions about leaseholds and leasehold mis-selling claims
What is a leasehold?
Many people who buy leaseholds later claim they did not understand that they were only buying the lease as this was not explained properly to them. The following are some of the basic things you need to know about what leaseholds are and how they work:
- If you purchased the leasehold interest in your property, you own the house subject to a ‘lease’.
- In essence, the land on which your property is built on is owned by another person, and they then lease that land to you for a period of time for a fee. That period of time is normally for 999 years or so
- This is the opposite to someone who owns the property outright, including the land it is built on, which would be freehold
- The fee paid every year on leasehold properties is known as ground rent
- If the property is leasehold, you also need to obtain the freeholder’s permission in order to make any changes to the property
What problems are there with leasehold properties?
- Many purchasers find that they are unable to sell their properties as some lenders will not grant mortgages on homes which have excessive ground rent clauses;
- Historically, the ground rents applicable to a leasehold interest were nominal at best (say £1.00 a year). However, with more and more new developments springing up developers saw an opportunity to profit. They often set ground rents at anywhere between £200 - £400 per annum with a clause that allows them to double this every 5 or 10 years;
- Average ground rents are estimated at £371 per year for new-build homes;
- Developers charge significant sums for homeowners to alter the original property, to, say, add a conservatory to their property etc.;
- The freehold owner can and will sell their freehold interest to another company who will increase the cost of it to make a profit.
Can I refuse to pay the ground rent on my property?
As a leaseholder, you are bound the terms of the lease that you signed when you bought the leasehold on your property. This means you are required to pay the ground rent specified in the lease, as well as any other costs, such as service charges.
If you refuse to pay the ground rent, the freeholder can potentially apply to a court to repossess the property. While this only applies if the ground rent exceeds £250 a year (or £1,000 a year in London), for most new leasehold property this will be the case.
Do I have a claim for being mis-sold a leasehold property?
Whether you can claim compensation for leasehold mis-selling will depend on whether you can show that the conveyancing solicitor who handled the purchase failed to properly inform you of what you were buying and/or key terms of the lease, such as a doubling ground rent clause.
Our team can advise you on the types of evidence you need to show that you were not properly advised by your conveyancing solicitor and then help you to put together a claim. We can negotiate with your former solicitor to agree compensation wherever possible and initiate court proceedings where required.
What is the law on selling leasehold houses?
The Government has committed to banning the sale of leaseholds on new-build houses (except in certain limited circumstances), capping ground rents at a “peppercorn” rate (i.e. zero financial value) and ensuring service charges are fair and proportional to the landlord’s costs.
The Government have also proposed largely replacing leasehold ownership of flats with commonhold ownership, which is a common system in other countries. This allows you to own the freehold on your flat, while holding communal areas, the outer fabric of the building and other shared parts of the property in common with the other occupants.
The Government has also suggested giving owners of leasehold houses the ‘right of first refusal’ to buy the freehold on their properties. This will potentially make it easier for those who have already been caught out by leasehold mis-selling to acquire their freehold.
How can you protect yourself against leasehold mis-selling?
While the government has proposed changes to the law on leasehold houses, it is still important to always take independent, expert legal advice when buying any property, leasehold or otherwise. This helps to ensure that you will be absolutely clear about what you are buying and the terms on which you are buying it.
Many people buying new build houses are encouraged to use the solicitor recommended by their developer. While this may sometimes allow you to avoid paying conveyancing fees or to pay a reduced fee, it is always safer to choose your own conveyancing solicitors who are completely independent of the developer or the estate agent dealing with the sale.
This is because using an independent solicitor means you can be completely confident that your interests are their only concern, so you can trust that they will give you fair, accurate advice about any and all issues that could affect you when buying your new home.
Contact our property dispute solicitors in Liverpool
If you believe you have been mis-sold a leasehold property, please contact our expert property litigation team to see how we can help you claim compensation.