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What you need to know about leaseholds

Thursday 06 September 2018

If you haven't heard about the leasehold scandal and don't understand what all the fuss is about, let us explain.

Although leasehold is a common form of tenure for flats, over the last 10 years it has increasingly been applied to new-build houses. 

Developers such as Persimmon, Bovis Homes, Bellway and Taylor Wimpey - to name a few - build these homes, marketed them as 'virtually freehold' and then subsequently sold the freeholds to various management companies, who inflated costs and slapped excessive charges on ordinary cosmetic alterations. 

Increasing ground rent costs, extortionate fees and the very real risk of being unable to sell their homes, soon become genuine concerns for many leasehold homeowners across the UK.

But after years of lobbying, the Government finally took notice and in 2017 promised to ban the sale of new-build leasehold properties (although legislation is yet to be passed). But with the law likely to change in the coming months, it is important that you understand how leaseholds work and are advising customers accordingly. 

So, what should you be telling buyers?

As an agent you have a level of responsibility, and Consumer Protection Regulations require you to pass on all material information in respect of a lease. And whilst no one expects you to become a leasehold expert overnight, there are a number of points agents should be advising buyers of before they commit to a sale. This includes, but is not limited to:

  • the number of years remaining on the lease;
  • ground rent costs and when it is payable, together with details of if or how this will increase over time;
  • the annual service charge costs and when it is payable;
  • details of any event-related fees & charges payable under the lease;
  • rent payable in the case of a shared ownership arrangement;
  • details of any other fees or charges contained within the lease;
  • if there is a sinking fund and how much money is held in it;
  • if the seller has any arrears which are likely to be chargable to the buyer;
  • details of any unusual restrictions or covenants affecting the use and enjoyment of the property.

This information should be provided as early in the marketing process as possible and not left until a potential buyer expresses a keen interest in a property. 

There is a level of responsibility at every level, whether you are an agent, mortgage lender or conveyancer, but as one of the first in a chain of people to interact with a customer, you should be providing at least a basic overview of the tenure and what this means for them as a buyer.

How we're helping you

We have extensive leasehold guidance on the way, so keep your eyes peeled over the next couple of weeks - you'll see it pop up in the members area of our website shortly, and we will sure to be raving about it in our next newsletter, so watch this space.

In the meantime, why not try our half day Understanding Leasehold Properties course run by leasehold specialist, Louie Burns. You'll receive the most up-to-date, comprehensive advice on the leasehold system, and the knowledge you need to successfully market and sell leasehold properties.

We've also partnered with Leasehold Valuers to create a leasehold calculator which provides members with an online ‘go to’ facility to help estimate the potential premium of a lease extension. 

And there's more - our dedicated members only legal helpline is available five days a week and offers specialist, practical compliance advice on a range of issues that affect agents on a day to day basis. So if you have a leasehold question, give them a call, and don't forget to have your membership number to hand.

For more information on what consumers should be looking out for, make sure to check out our Propertymark website, which is full of handy advice and top tips for leaseholders.