While leasehold flats are par for the course in the UK and rarely throw up issues, leasehold houses are a much more contentious issue and they’re continuing to cause headaches…

As many as 94% of people who bought a leasehold house now regret doing so, according to figures from a new survey carried out by NAEA (National Association of Estate Agents) Propertymark to highlight the extent to which the recent leasehold scandal has affected homeowners in the UK.

While the government announced in December that it would ban the sale of “unjustified” new leasehold houses, and prevent property developers from using government funding schemes if they were involved in selling such properties, there are still many homeowners trapped in leasehold houses with restrictive and often unfair terms.

What’s the problem with leasehold houses?

One of the biggest issues that came to light about these properties was the increasing ground rents – sometimes set at £200-£400 a year but with the prospect of doubling every 10 years, making the homes extremely difficult to sell on. According to NAEA Propertymark’s survey, almost half (48%) of people said they were unaware of the escalating ground rent before they bought the property.

Another major problem is the amount that freeholders are able to charge for leaseholders to make changes to their homes, which figures suggest has already affected 10% of leasehold house owners. Examples cited in the survey include being charged a fee of £1,597 to gain permission to add an extension or conservatory, £1,472 to install new bathroom units and £1,348 for structural changes.

Although the homes are often sold with a 999-year lease, and sometimes described as “practically freehold”, in fact the restrictions placed on them often mean this isn’t the case. The survey reports that around 70% of those who regret buying a leasehold house are worried they won’t be able to sell it, while around 60% of those selling right now say they are struggling because the property isn’t freehold.

Most houses are still sold as freehold

Mark Hayward, chief executive of NAEA Propertymark, said: “In most instances, the freehold is sold onto a third party within a few years of the initial sale. This means the terms in the contracts homeowners have signed will change, and any negotiations are made more difficult.”

Even though the government is working to prevent home buyers being “exploited through unfair and abusive practices within the leasehold system”, nothing has yet been put in place to help existing owners of such houses.

However, a Home Builders Federation (HBF) spokesperson said: “The vast majority of new-build houses are sold on a freehold basis, but it can be necessary on occasion to sell new houses with leases. As such, leasehold is a well-established and secure tenure with which to own a home.

“In all transactions, builders strive to provide prospective purchasers, their solicitors and their mortgage lenders with all relevant information.”

“Purchasers are always advised to engage their own legal advice during the purchase of a home.”

NAEA Propertymark proposes that buyers of new-build homes should have access to an ombudsman scheme if they feel they have been unfairly treated, and freeholders should be required to sign up to a redress scheme. It also believes that homeowners should get first refusal when the freehold is being sold – at present, “right of first refusal” applies only to flats, not houses, so developers can sell the freehold on without having to inform the leaseholder.