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Home » Competition watchdog investigates scandal of leasehold houses

Property Dispute Resolution
Terrace of new houses
Sep 8th, 2020

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Competition watchdog investigates scandal of leasehold houses

The contentious issue of leasehold houses is again in the news. What has been dubbed the “fleecehold” trap involves tens of thousands of people who have purchased their homes from developers in recent years. In addition to mortgage payments, they are tied into contracts requiring them to pay ground rent to the owners of the freehold. And should they wish to extend or carry out alterations to the property, some face the prospect of hefty fees to gain freeholder approval.

An investigation by the Competition and Markets Authority (CMA) has found that the annual cost of many ground rents soars swiftly, with some doubling every ten years. As such, freeholds have become attractive to investors, with developers typically selling them on to investment companies.

The CMA also has concerns over mis-selling, with many buyers told they would be able to buy the freehold of their home for a modest sum at a later date. Subsequently, they have discovered that the cost will be many thousands of pounds. In addition to the increasing cost of ground rent, this has resulted in homes becoming, in effect, unsaleable.

National Leasehold Campaign

The National Leasehold Campaign (NLC) is a group comprising over 18,000 leaseholders. Describing the latest stage of the CMA investigation as a “massive step forward,” a spokeswoman for the NLC said that “thousands of leaseholders face continued uncertainty from the leasehold scandal and its long-term financial burden. It is time these developers do the right thing.”

All of the developers named by the CMA have now committed to cooperate in their ongoing investigation.

Housing Secretary, Robert Jenrick, described the developers’ practices as “shameful” and said that the government is committed to ending them. But where that will leave existing leaseholders remains uncertain. The NLC hope that, at the very least, ground rents will be reduced to zero and past payments refunded.

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