Scandalous ground rent impositions on house owners

I must confess that I do appal the ‘clanking fist’ of government when it interferes in markets and where usually the ‘cure is worst than the curse’.

However, the scandalous arrangements that some house developers have been imposing on unsuspecting buyers, is intolerable.

Traditionally, a new house is sold by the developer, to a purchaser, with a freehold interest and the moment completion takes place, apart from the defect period which could run from one to two years beyond this, there is no further relationship between owner and developer. Effectively, they go their own ways.

Canny developers are now trying to ‘pull the wool over the eyes of unsuspecting house buyers’ by selling them a long leasehold interest (rather than a freehold) initially, with a ground rent of circa £200 which invariably doubles every ten years. A typical ground rent is £365 and this could morph into many thousands of Pounds sometime in the future.

The length of these leases are invariably 100-150 years, but in some cases it could be 999 years and whilst this may, at first, look like an ‘effective freehold’ the ground rent provisions and fees for alterations can ‘lay like traps’ for the unsuspecting purchaser who become the victims.

If the purchaser’s mortgagee accepts the leasehold arrangements, then the owner could be bound into an investment, that over time could prove less beneficial than at first it would appear.

After the development is sold and the developer moves off site, they can then sell the leasehold interest of the properties to a third party for a tidy sum, typically £5-10,000 each, or perhaps £40,000, in some cases, where the owners wish to buy the freehold back themselves.

It is proposed by the Communities Secretary, Sajid Javid to introduce a Bill to ban the future sales of houses as leaseholds as well as cutting ground rents to zero.

Thank goodness that sanity has prevailed and after much lobbying the government has ‘seen the light’ and are going to protect the innocent and unsuspecting buyer from being lured into this folly. Hoorah for common sense and I hope that the house builders learn a salient lesson from this debacle.