A growing number of home buyers are finding they are the being stung by onerous ground rent agreements written into the terms of their leasehold.
That can mean they find it near-impossible to sell their properties and, if they fail to keep up the payments, their homes can be seized.
Sebastian O’Kelly from the Leasehold Knowledge Partnership told ITV News the situation was a “national scandal”.
Put simply, leaseholders own a lease on their home, while freeholders own their home outright.
There are often good reasons to be a leaseholder. There are about three million leaseholders in the UK and many properties – usually flats – are sold as leaseholds, while another party owns the freehold of the building.
Leaseholds are long-term leases, typically for periods such as 999 years.
Some say that at 999 years there is little difference between a leasehold and a freehold, but in fact the two are very different.
Leaseholders are subject to the conditions laid out in their lease, which usually include payments for maintaining the property and restrictions on alterations they can make to it.
- So why is this a problem now?
There has been an emerging trend of developers of new-build properties selling the leasehold of houses that would ordinarily have been sold as freeholds.
The leaseholds include an agreement to pay ground rent to the freeholder – a common leasehold provision – but in the case of these new properties the terms of the lease provide for the ground rent to be hiked substantially.
In some cases the ground rents are doubled every 10 years. In others they rise year-by-year in relation to the retail price index.
Because leaseholds are long-term leases, typically for periods such as 999 years, that amount looks small to begin with and many first-time buyers ignore it.
But over the years it quickly mounts up.
- Who is this affecting?
Anyone who buys a leasehold where the lease contains these terms will be bound by them, but in practice many of those affected are first-time buyers.
According to the Leasehold Knowledge Partnership, a heavy concentration of these leasehold houses are being built in poorer regions, such as the North West.
- What is being done about it?
The issue is slowly getting more publicity and there have been calls for leaseholds on houses to be banned.
The All Party Parliamentary Group has pressed for change and Housing Minister Gavin Barwell has promised the Government will be putting forward plans for leasehold reform this year.