Are you entitled to compensation due to onerous ground rent charges?
Thousands of landlords trapped in developer contracts with spiraling costs could be entitled to compensation, according to legal experts.
Around 100,000 homeowners across the UK, including many buy-to-let landlords, are estimated to be affected by onerous ground rents.
Britain has long had leasehold homes, but only in recent months has the ground rent scandal exploded.
A complete ban on new houses sold as leasehold is now being proposed by the government, while it also wants to reduce ground rents to zero.
In addition, the competition watchdog has now formally launched an investigation into the housing market over the mis-selling of leasehold properties.
Daniel Brumpton, partner and head of Nelsons’ professional negligence team, said: “The Competition and Markets Authority [CMA] has formally launched an investigation into the housing market over the misselling of leasehold properties, which will investigate permission fees, ground rents and other terms associated with leasehold properties.
“The competition watchdog will be consulting with developers, lenders and freeholders requesting information in relation to how leasehold agreements are drawn up, agree and subsequently maintained by the parties. The report will also consider the effects that ‘unfair’ terms have on leaseholders and have asked for people to share how they have affected their lives.
“Developers and freeholders could face legal action if the watchdog finds evidence of leasehold mis-selling.”
The East Midlands-based law firm Nelsons is prepped to take on compensation claims from property owners in the East Anglia, East Midlands, Yorkshire, North East and far North West regions.
Brumpton says that there is a lot landlords can do if they are caught in the ground rent trap.
He added: “There are currently four million leasehold properties in the UK, with around 100,000 of these being affected by onerous ground rents.
“We’re ready to help landlords who have found themselves unwillingly involved in the leasehold mis-selling scandal to bring a professional negligence claim against the conveyancing solicitor they instructed to help with the purchase of the property.
“If the solicitor failed to give you advice about the existence and implications of the onerous ground rent clause, we can assist you in suing for damages.
“Historically, ground rents have been low – no more than around £50 per year. However, in the last few years, housebuilders have started to increase ground rents to an initial charge of between £250 to £500 a year.”
Brumpton points out that some developers have also added clauses in the lease that allow them to review the ground rent periodically, for example, every five, 10 or 25 years. Typically, the review clause allows the freeholder to increase the ground rent at each review.
He continued: “In theory, a ground rent that doubles every 10 years doesn’t sound too bad. However, most leases are set for the long-term such as 999 years. If a ground rent of £250 per year doubles every 10 years, you can expect to pay £16,000 per year after 60 years. For many people, that’s simply unmanageable. This is also not something a landlord of a buy-to-let property could expect to pass on to tenants either.
“If you are a leasehold owner who purchased a new build property in the last 10 years, you should check your lease to see what it says about ground rent and what you can expect to pay.”