After the Help to Buy scheme was introduced, a large number of home builders decided to start selling their newly built houses on a leasehold basis rather than on a freehold one. Sooner rather than later, the government felt that this was wrong, and they needed to intervene.
A small amount of the UK’s major housebuilders are often accused of putting profit before their social conscience. By this, we mean that they understand that the country is in need of new homes, but they would rather wait to make more money for their shareholders. The media accuses them of “land-banking”, which is a term used for when land is not built on because the market conditions are not favourable.
Due to consolidation in the industry, sometimes Builders inherit land into their organisations which is on a leasehold basis. They argue that they offer both leasehold and freehold properties for sale so that buyers can make an informed choice.
Many people started to feel as if the property market had shifted more towards leasehold houses once it was made aware how much the builders had been making off the back of the leases. Things came to light once it was revealed that the chief executive for one of the UK’s leading builders received a bonus over £100m.
Some leasehold homeowners were surprised to find that they had been quoted thousands of pounds in fees when they sought permission to make alterations to their homes. These fees where being charged by leasehold management companies.
Some of the annual ground rents were to double every 10 years and owners could see that selling their home in the future once these increases have kicked in would be more difficult.
After notifying their MP’s and getting the subject debated in parliament, the government agreed that if you were buying a house (not a flat or apartment) then it is more than likely it will be freehold.
If you are in the situation of owning one of these houses and you didn’t realise if was leasehold, then you definitely should’ve been made aware.
Remember, you can always contact the freeholder of your house if you are interested in buying the freehold off them. If you want to buy, you will need to negotiate a deal with the freeholder and factors like the length of time that you live in the property will be a big one.
Another big issue alongside leasehold houses is the service charges. When the council grants permission to housebuilders to build on a plot of land, common areas such as grass verges and roads are left out. Which means that these areas need to be outsourced to another company, this saves the builders and the homeowner money. Then, the owners of the leasehold property have to make a financial contribution on top of their council tax. This can happen to both freehold and leasehold houses.
You will also find that the costs of service charges can arise, which is another expenditure to consider on top of your taxes. Sometimes, the residents in the area get together to form an association which might allow them to choose a different service provider.
If you are looking at leasehold houses and debating whether to buy one, you should speak to your solicitor first in regards to the lease. It’s very easy to get carried away with the excitement of buying a home but you need to also realise that this is a major investment decision that you need to think about carefully.