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You can find the current article at its original source at https://www.theguardian.com/money/2017/jul/29/new-build-leaseholds-banned-existing-homebuyers-trapped
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| Victory! New-build leaseholds banned … but what of those already trapped? | Victory! New-build leaseholds banned … but what of those already trapped? |
| (25 days later) | |
| Many leasehold homeowners face being charged hundreds of pounds just to obtain permission to switch to a new mortgage, Guardian Money can reveal. And some must even hand over a fee to the freehold owner if they want a pet. It’s the latest twist in the growing scandal of unfair and outrageous demands made by private companies that snap up freeholds from developers, then hit homeowners with huge costs. | Many leasehold homeowners face being charged hundreds of pounds just to obtain permission to switch to a new mortgage, Guardian Money can reveal. And some must even hand over a fee to the freehold owner if they want a pet. It’s the latest twist in the growing scandal of unfair and outrageous demands made by private companies that snap up freeholds from developers, then hit homeowners with huge costs. |
| The government this week announced plans to ban leasehold on future new-build homes, and cut ground rents on new flats to as low as zero. But those already trapped in spiralling ground rent contracts say the nightmare will continue until developers are forced to pay compensation. | The government this week announced plans to ban leasehold on future new-build homes, and cut ground rents on new flats to as low as zero. But those already trapped in spiralling ground rent contracts say the nightmare will continue until developers are forced to pay compensation. |
| Baz Jafar bought his one-bed flat in Upper Edmonton, north London, in 2015 from Countryside Properties for £225,000 on a 250-year lease. Like many others he is furious at how his ground rent will double every 10 years – but says he is also forced to pay a fee of between £100 and £200 should he wish to remortgage. Countryside sold the freehold on his property – and those of his 70 neighbours – to Adriatic Land five months after completing the estate. | Baz Jafar bought his one-bed flat in Upper Edmonton, north London, in 2015 from Countryside Properties for £225,000 on a 250-year lease. Like many others he is furious at how his ground rent will double every 10 years – but says he is also forced to pay a fee of between £100 and £200 should he wish to remortgage. Countryside sold the freehold on his property – and those of his 70 neighbours – to Adriatic Land five months after completing the estate. |
| “Who I remortgage to should be none of their business,” he says. “All of us at this site are also affected by doubling ground rent. My £200 ground rent will be £6,400 per annum by year 50 of my lease.” He adds that even if he wants to have a cat or a dog he has to contact Adriatic Land’s agents and pay a fee of around £40. He doesn’t know what price the firm will demand for him to buy out the freehold, even if they are willing to sell. “I would have to pay £100 just to find out the inflated price they would charge.” | “Who I remortgage to should be none of their business,” he says. “All of us at this site are also affected by doubling ground rent. My £200 ground rent will be £6,400 per annum by year 50 of my lease.” He adds that even if he wants to have a cat or a dog he has to contact Adriatic Land’s agents and pay a fee of around £40. He doesn’t know what price the firm will demand for him to buy out the freehold, even if they are willing to sell. “I would have to pay £100 just to find out the inflated price they would charge.” |
| Adriatic Land collects its fees through its agent HomeGround, and a spokesman for both says all its fees are reasonable for the administrative work required and are benchmarked against industry standards. A spokesman says “anyone can ask about fees at any time”, but the company’s website does not disclose what HomeGround’s fees are. | Adriatic Land collects its fees through its agent HomeGround, and a spokesman for both says all its fees are reasonable for the administrative work required and are benchmarked against industry standards. A spokesman says “anyone can ask about fees at any time”, but the company’s website does not disclose what HomeGround’s fees are. |
| Jafar is not alone in finding that freehold companies will demand cash when remortgaging. Louise Bragg bought her £285,000 house from Barratt Homes on an estate near Chorley, Lancashire, in 2013. Despite, she says, being told she could purchase the freehold after two years “for a few thousand pounds”, Barratt sold it and others on for, she believes, around £9,000 per property to Aviva Investors Ground Rent Holdco. The latter is now demanding £13,000 if she wants to buy them out. | Jafar is not alone in finding that freehold companies will demand cash when remortgaging. Louise Bragg bought her £285,000 house from Barratt Homes on an estate near Chorley, Lancashire, in 2013. Despite, she says, being told she could purchase the freehold after two years “for a few thousand pounds”, Barratt sold it and others on for, she believes, around £9,000 per property to Aviva Investors Ground Rent Holdco. The latter is now demanding £13,000 if she wants to buy them out. |
| Bragg’s lease also contains a clause demanding payments on remortgages set at 0.05% of the property value. So if her home is valued at £300,000 she will have to pay a fee for remortgaging of £150, charged by Aviva’s agents, Mainstay. Other Mainstay charges include £50 plus VAT if the property owner wants a pet. | Bragg’s lease also contains a clause demanding payments on remortgages set at 0.05% of the property value. So if her home is valued at £300,000 she will have to pay a fee for remortgaging of £150, charged by Aviva’s agents, Mainstay. Other Mainstay charges include £50 plus VAT if the property owner wants a pet. |
| Bragg reckons the remortgage fee is an unfair contract term and is contesting it on that basis. But she adds: “We merely want to be able to FULLY purchase our freehold at a fair price, as this is what was promised from the outset.” In a statement Aviva says: “In some cases a small fee applies if a leaseholder wishes to remortgage or make structural changes. This is to cover administration costs.” | Bragg reckons the remortgage fee is an unfair contract term and is contesting it on that basis. But she adds: “We merely want to be able to FULLY purchase our freehold at a fair price, as this is what was promised from the outset.” In a statement Aviva says: “In some cases a small fee applies if a leaseholder wishes to remortgage or make structural changes. This is to cover administration costs.” |
| Bragg and Jafar are just two of many victims of the leasehold scandal who contacted Guardian Money this week in the wake of the government’s proposed ban on new-build leasehold homes, plus a dramatic reduction in ground rents on new-build flats towards zero. | Bragg and Jafar are just two of many victims of the leasehold scandal who contacted Guardian Money this week in the wake of the government’s proposed ban on new-build leasehold homes, plus a dramatic reduction in ground rents on new-build flats towards zero. |
| But the future for existing leaseholders, in flats as well as houses, remains unclear. The government has promised it will tackle abuses of leasehold and is encouraging developers to assist buyers who have been caught in the trap of unsaleable properties. But while communities secretary Sajid Javid, talking about leasehold abuses generally, has said “enough is enough. These practices are unjust, unnecessary and need to stop”, and that they are “an unjustifiable way to print money”, he told BBC Radio 4’s Today programme that there were not as yet any definite government plans to compel builders to take action to assist those already affected. | But the future for existing leaseholders, in flats as well as houses, remains unclear. The government has promised it will tackle abuses of leasehold and is encouraging developers to assist buyers who have been caught in the trap of unsaleable properties. But while communities secretary Sajid Javid, talking about leasehold abuses generally, has said “enough is enough. These practices are unjust, unnecessary and need to stop”, and that they are “an unjustifiable way to print money”, he told BBC Radio 4’s Today programme that there were not as yet any definite government plans to compel builders to take action to assist those already affected. |
| Javid pointed to the £130m assistance scheme set up by Taylor Wimpey as an example to other developers – but critics say it does not go far enough as it does nothing to protect those people who bought on Taylor Wimpey estates a few years after construction. | Javid pointed to the £130m assistance scheme set up by Taylor Wimpey as an example to other developers – but critics say it does not go far enough as it does nothing to protect those people who bought on Taylor Wimpey estates a few years after construction. |
| Magda Kowalski (not her real name) bought a two-bed flat as a resale on a Taylor Wimpey estate. “I feel in an even worst situation because I am not the original buyer of my flat, so the scheme that Sajid is referring to does not at all apply in my case. I live in south-east London, and the freehold on my apartment block was sold to E&J Estates a year ago, which means my contract about doubling rent every 10 years is with them. They will have no incentive to deal with this, especially now that a new revenue stream is in danger. Not unless there is a change in law to tackle new and existing onerous clauses in contracts, such as this one.” | Magda Kowalski (not her real name) bought a two-bed flat as a resale on a Taylor Wimpey estate. “I feel in an even worst situation because I am not the original buyer of my flat, so the scheme that Sajid is referring to does not at all apply in my case. I live in south-east London, and the freehold on my apartment block was sold to E&J Estates a year ago, which means my contract about doubling rent every 10 years is with them. They will have no incentive to deal with this, especially now that a new revenue stream is in danger. Not unless there is a change in law to tackle new and existing onerous clauses in contracts, such as this one.” |
| Her 125-year lease contains ground rents that soar to £8,000 a year by 2060. “I am getting really worried that I will be stuck in this flat forever, with ever-increasing costs. I have emailed E&J Estates, who have said Taylor Wimpey is unable to help and, despite my further inquiry, it has not responded since. I fear there may not be many options left, and the situation seem pretty dire.” | Her 125-year lease contains ground rents that soar to £8,000 a year by 2060. “I am getting really worried that I will be stuck in this flat forever, with ever-increasing costs. I have emailed E&J Estates, who have said Taylor Wimpey is unable to help and, despite my further inquiry, it has not responded since. I fear there may not be many options left, and the situation seem pretty dire.” |
| Linda Barnes who lives in Heywood, Greater Manchester, is another buyer in the “resale” trap, where ground rents are guaranteed to double but there is no help from the developers who set up the scheme. “We’re in sheer panic. There are 42 houses and 24 flats on the estate. The ground rent clauses have made them unsaleable at a normal market price. The government has got to do something to help people in our position.” | Linda Barnes who lives in Heywood, Greater Manchester, is another buyer in the “resale” trap, where ground rents are guaranteed to double but there is no help from the developers who set up the scheme. “We’re in sheer panic. There are 42 houses and 24 flats on the estate. The ground rent clauses have made them unsaleable at a normal market price. The government has got to do something to help people in our position.” |
| The freeholds, initially on offer at £4,900, were snapped up by E&J Estates at a price believed to be around £9,000 per property. Barnes says surveyors have told her the company now wants around £40,000 per freehold – on an estate where the flats were sold for £80,000-£90,000 and the houses at £150,000. | The freeholds, initially on offer at £4,900, were snapped up by E&J Estates at a price believed to be around £9,000 per property. Barnes says surveyors have told her the company now wants around £40,000 per freehold – on an estate where the flats were sold for £80,000-£90,000 and the houses at £150,000. |
| E&J Estates did not respond to requests for comment, saying it would only deal with leaseholders directly. | E&J Estates did not respond to requests for comment, saying it would only deal with leaseholders directly. |
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