There's been massive attention on leasehold properties over the last few months, and not for any positive reasons! Some are now referring to leasehold properties as the 'PPI of the building industry'.
Freehold generally means that you own the property indefinitely, until you decide to sell up. So as long as you pay your mortgage, it's yours!
A Leasehold means that you can only own the property for a specified period of time. When the lease comes to an end, the property reverts back to the Landlord.
More recently leases are being issued with a 999 year term, meaning that the property will likely be long gone before the lease expires. However, not so long ago leases were often shorter and usually stood at around 125 years. The vast majority of flats are leasehold properties, and shared ownership properties often are too.
Largely this is down to unfair practices that have been taking place over the last few years. You might even go as far as to say people have been abusing the system. One of the main practices that has come under fire is the doubling of ground rents every 10 years. This might not seem like an issue when you're buying the property, but these rents can soon become eye-watering, and will make it difficult for people to sell up!
Some mortgage companies have become wise to this issue, with banks such as Santander and Nationwide refusing to approve mortgages where there is a ground rent clause in the lease terms. Or in cases where the annual ground rent is more than 0.1% off the property value.
There have also been issues where leaseholders have been told that they can purchase the freehold after 2 years, only to find that these have already been sold on to third party investment companies. These companies often have no intention to sell or quote astronomical fees.
In cases where leases have been sold on, some homeowners have found themselves being forced to pay astronomical 'permission fees' when making alterations to their home. According to research by Which? these have ranged from £250 to £2,500. Check out the Which? case study below, and you can read more about their thoughts/research here.
You can read more on the Government plans here, who are still working on resolving the issues with the leasehold market.
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