The cost of leasehold is more than simply financial for many homeowners, according to new research.
A survey by the National Association of Estate Agents (NAEA) has revealed that homeowners who own a leasehold property pay on average £319 every year on ground rent.
That means the domestic leasehold market in England and Wales amounts to some £447 million every year.
However, the financial costs are only one element of leasehold. One in 10 of those quizzed by the NAEA said paying for leasehold and worrying about rising costs affects their quality of life.
One in 10 had also seen their ground rent rising since they had moved into their home, usually within seven years of taking possession. One in five (19 percent) didn’t understand from their leasehold contract by how much their ground rent would rise.
And almost half (46 percent) told the survey they might not have bought their home if they had had any idea of the true costs of leasehold.
The Government has promised to reform the leasehold system in England and Wales. Leasehold means a homeowner must pay rent on the land on which their property stands for a specific period of time to the landlord or freeholder.
The Competition and Markets Authority (CMA) has launched its own investigation into alleged mis-selling of leasehold properties with buyers claiming they face escalating ground rent charges and expensive fees that combine to make their property unsellable.
The investigation aims to discover if people are fully informed of how leasehold works and their obligations under the system, while also investigating claims of excessive fees and unfair contracts.
Mark Hayward, chief executive of the NAEA, said: “Buying a home is one of the biggest financial and emotional investments we make in our lifetime, and once we’ve completed and moved in, we should be able to enjoy the property.
“But, unfortunately for those buying leasehold houses, the financial burdens continue, with ground rent payments to the freehold every year.
“Even though many leasehold contracts include a 10-year ground rent freeze, most developers sell the freehold on to a third party within a few years of completion, and those terms go out the window, meaning homeowners are faced with unexpected and escalating costs.
“It’s positive to see action being taken, with the recent announcement that the CMA will be investigating the mis-selling of leasehold properties, as for too long house builders and developers have not been transparent enough about what it actually means to buy a leasehold property.”
Fran is the content writer for Capital Conveyancing, producing articles on all aspects of the conveyancing process and around the UK property market in general. If there is a topic you'd like to see covered on these pages, please drop Fran a line on [email protected]