“The PPI of the house building Industry”
The APPG for Leasehold and Commonhold Reform managed to secure a debate in the commons chamber on Tuesday 20th December 2016 to discuss the leasehold new houses scandal. With 53 APPG members, it was surprising that only 13 MPs and Housing Minister Gavin Barwell attended initially. I previously highlighted the scandal of leasehold new houses on 7 November 2016 entitled “The next mis-selling scandal” This phrase apparently being picked up, with the Labour MP for Ellesmere Port and Neston, Justin Madders calling the practice during the debate as “the PPI of the house building Industry”. See also Never buy a leasehold new house 28 October 2016
Leasehold new houses scandal
An analysis by the excellent campaign group Leasehold Knowledge Partnership (LKP) in November 2016, revealed that 8,775 new-build leasehold houses totalling nearly £2billion were sold in England and Wales last year. In all around 45,000 new houses have been registered as leasehold. Many of these bought with help from taxpayers’ through the Help to Buy scheme. In most cases, the housebuilder sells the freehold after a couple of years to a private company, which can then demand extortionate fees from homebuyers.
Buyer beware: The great leasehold new house scam
When will the incessant greed of housebuilders reach its zenith? Not content with charging premium house prices, large plc housebuilders keep coming up with new ways to squeeze every last drop of additional profit from unsuspecting new homebuyers. It started with overpriced optional extras and upgrades. Then shared driveways and non-existent front gardens enabled housebuilders to cram in even more homes on their developments. Next came the Freehold house with Leasehold type management charges – inescapable “annual rentcharges for maintenance of communal amenities on the development”, commonly around £200 a year for each home, normally for ‘maintaining’ landscaped areas.
Also becoming increasingly common, are charges for private roads, footpaths and street lighting on developments. These charges are even more galling when builders fail to fully-complete these areas for months, sometimes years after the last house was built and sold.
The website Home Owners Rights Network has been set up to fight the unfairness of these charges and campaign for a change in the law. The Leasehold Knowledge Partnership was set up to protect ordinary leaseholders.
Now some housebuilders have taken fleecing buyers to a whole new level. Selling Leasehold new houses, but at Freehold prices. There can be no other reason for this other than to increase their bottom line. As the Daily Mail reported in May 2015, two new housing estates were being built in on either side of London Road in Peterborough. At the time, Persimmon were building 50 new homes at “The Edge” on the east side, selling three bedroom homes for £158,995 – £180,000. On the other side of the road at “The Sycamores” Barratt were building 80 new homes, almost identical in appearance, with a three-bedroom property costing from £163,995.
A recent report released by the Legal Ombudsman shows a high rise in the number of complaints against solicitors – in particular against conveyancers. One of the most serious issues that has grabbed the headlines were reports of solicitors not paying the stamp duty on behalf of their clients. Whilst rare, this is fraudulant. HMRC, often many years later, are coming after homeowners for payment of the original stamp duty due with interest charges added on top.
Of the 7,500 complaints received by legal ombudsman in the survey, around 18% were concerned with residential conveyancing. It is thought that this due to a large extent, by the growth in the number of online conveyancers and so-called “tick-box, bucket shop style, call centre conveyancing services” often offering a conveyancing service for as little as £300.
Buying a home is almost always likely to be the largest purchase most people will ever make. It is a legal transaction and buyers and sellers need professional and qualified legal representation. Yet despite this, after looking at the other costs involved in moving home, many choose ‘cheap’ rather than ‘best’ when it comes to appointing a solicitor – a decision as the report highlights, many often deeply regret.
It is always best to have a solicitor who is local to you so that when there are issues they can be discussed face to face. They could be complex and if there is a problem you need a professional on your side to solve the problems on your behalf, not just part of a box ticking exercise. You may find there are issues years later when you come to sell the house that were missed by the conveyancer when you bought.
The advice is always to get a recommendations from people who have just bought or sold. Speak to them. Then ask yourself: Does the solicitor sound competent? How well do they communicate? Will they protect your interests? Feel free to negotiate on their fees but don’t skimp.
Finally, if you are buying a newly built home, never, repeat never use the solicitor “recommended” or “suggested” by the house builder. They may claim it will be “quicker” and “easier” but you can be sure there will be a conflict of interest. In addition, under the Consumer Code for Home Builders, Requirement 2.5 states that house builders cannot restrict your choice of legal representation.