The new property trap affecting thousands

When putting pen to paper to buy a new home, most people expect to know how much they will need to pay to own it outright. But thousands of families in England and Wales are discovering the new-build houses they bought are not all they seemed.

Some new build houses are being sold on a leasehold basis – meaning you own the property for the 150-year length of her lease agreement.

Some buyers are being fooled in to thinking that because of the long lease it was “as good as freehold”; a property owned outright.

Buyers are being told they can buy the freehold after two years, believing it would cost between £2,000 and £4,000, however some freeholds are being sold to investment companies which are quoting over £10,000 to buy the freehold.

Leaseholds and freeholds

  • A freeholder of a property owns it outright, including the land it is built on.
  • Most houses are freehold but some might be leasehold – usually through shared-ownership schemes.
  • With a leasehold, the person owns the property for the length of their lease agreement with the freeholder.
  • Leaseholders have to pay their freeholders ground rent and other fees in order to make changes to their homes.
  • When the lease ends, ownership returns to the freeholder unless the person can extend the lease.
  • Some wish to buy their freeholds to save themselves these costs.

Source: The Money Advice Service

Selling a new home as leasehold, and then selling the freehold separately to an investment company without informing the family living there – is not illegal.

In England and Wales, the “right of first refusal” applies to flats, but not houses. So companies are not legally obliged to tell the owners it would do this.

For an investment company, buying groups of freeholds is a safe long-term investment. Receiving regular payments for ground rents – over leases that number well over 100 years – means safe, steady incomes, to fund things like pensions.

Here are Homeline Mortgages we are experts in our field and can not only advice you on your mortgage but can provide you with all the information you require to ensure you know exactly what you are buying. Give us a call today on 01202 937444.