Half of leasehold house owners didn't know they were only buying lease, research finds

94% of purchasers now regret decision and 62% think their property was mis-sold, NAEA Propertymark finds

More than half of homeowners who bought a leasehold house in the past 10 years did not realise that they were only buying a lease, new research has found.

NAEA Propertymark surveyed more than 1,000 people who had bought a leasehold house and found that 94 per cent now regret their decision and 62 per cent believe it was mis-sold.

Owners of leasehold houses often have to pay ground rent as well as other fees if they want to make changes to their homes. Many say they were not aware of these charges when they bought the property.

Freeholders charged leaseholders £1,422 on average to install double glazing, £887 to change the kitchen units, and £689 to replace the flooring, the report found. Some even faced bills for changing their blinds (£527) and installing a new front door (£411).

While the freehold on a block of flats is commonly owned separately, with each unit being leasehold, the practice is increasingly being used by developers selling houses, where purchasers may not be alert to the fact they face extra charges.

More than three-quarters (78 per cent) of leasehold house owners surveyed had bought their home directly from developers and 57 per cent did not realise what being a leaseholder meant until they had bought the property.

Almost two thirds used the solicitor recommended by the developer and 15 per cent said they were never told that they wouldn’t own the freehold.

Leaseholders are currently paying an average of £319 a year for ground rent, with most having been in their properties for three or four years, the report found.

A third of those surveyed who were trying to sell the said they were struggling to find a buyer because they do not own the freehold and a quarter said house hunters who were interested were put off when they found out it was a leasehold home.

Mark Hayward, chief executive at NAEA Propertymark said: “Most buyers have no idea about the trappings of a leasehold contract until it's too late.”

In July, communities secretary James Brokenshire, announcing housing measures for England, said it was not fair that homeowners were facing unexpected costs that rise every year and bear no relation to services.

“So from now on any new Government funding scheme will contain the condition that the money cannot support the unjustified use of leasehold for new homes,” he said.

A Ministry of Housing, Communities and Local Government spokesperson said: “It's unacceptable for home buyers to be exploited through unfair and abusive practices within the leasehold system, and the findings in the Propertymark report underline our position that real action is needed.

“This is why we have already announced measures that include a ban on leaseholds for almost all new-build houses and restricting ground rents to a peppercorn.

“We are also working with the Law Commission to support existing leaseholders to make buying a freehold or extending a lease faster, fairer and cheaper.”

A spokesperson for the Home Builders Federation (HBF) said it was sometimes necessary to sell new houses with leases.

“This includes where the developer itself does not own the freehold. Leases for houses, like flats, commonly include proportionate ground rents that do not impinge on the mortgageability or saleability of a property and, 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."