Latest news with #LeaseholdandFreeholdReformAct2024
Scottish Sun
2 days ago
- Business
- Scottish Sun
The sneaky service charges adding thousands to YOUR bill and how to fight back
One flat owner says he regrets his investment where he now pays £5,300 per year in charges FEE PAIN The sneaky service charges adding thousands to YOUR bill and how to fight back Click to share on X/Twitter (Opens in new window) Click to share on Facebook (Opens in new window) MILLIONS of people living in leasehold properties are being hit with spiralling service charge fees - but there is a way to fight back. Almost five million homeowners pay service fees, which have risen 11% in the last year to an average of £2,300 per month, according to Hamptons. Sign up for Scottish Sun newsletter Sign up 3 Soaring service charge fees and delays to legislation has left leaseholders out of pocket Credit: Getty Some leaseholders have seen charges sky rocket, making it unaffordable and tricky to sell their home. While others have been hit by unfair charges. The government has planned to reform the system - but there are delays. This week JAMES FLANDERS explains how to challenge unfair charges. SOARING FEES Service charges are a fee paid by a leaseholder or resident set by a landlord. The amount varies each year depending on costs to the landlord. They can include charges for maintenance, repairs and insurance. The details are usually set out in your lease. The fee is usually set on what the landlord thinks they will spend. At the end of year the landlord should provide a statement. Detail of world's tallest apartment block revealed - including price of penthouses Some leases allow landlords to ask for contributions towards a "sinking fund" to build up reserves for future larger scale works. David Fell, lead analyst at Hamptons, said: "Both buyers and mortgage lenders have become increasingly cautious about committing to high service charge costs, particularly where they perceive charges to be disproportionate to the amenities they get in return. "As a result, would-be sellers paying high charges have often seen the value of their homes rise more slowly or even fall. "In some cases, sellers are offering potential buyers a cash contribution towards future service charge payments." 3 Service fees have rocketed over the past five years, particularly in the North of England UNFAIR CHARGES Some leaseholders have found that they are being charged unfair fees. Tribunal judges have made some landlords pay back up to £100,000. In one example, they ruled that a £135 fee to change two light bulbs was excessive. In February 2023, it was revealed that landlords and insurance brokers were secretly taking up to 60% of the £1.6billion leaseholders paid for building insurance as hidden commissions. New rules now stop insurance companies from choosing policies just to earn the highest commission, helping leaseholders get better value. But brokers and managing agents are still allowed to take commissions. The government has promised to ban excessive building insurance commissions through the Leasehold and Freehold Reform Act 2024. Instead, landlords will only be able to charge a straightforward and fair "permitted insurance fee" for the work they actually do, making costs clearer and protecting leaseholders from hidden charges. However, these proposed laws still need further legislation to come into effect, and the government hasn't yet provided a timetable for this. New rules planned by the government also plan to introduce commonhold agreements to replace leasehold ones. Commonhold allows flat owners to jointly own and manage their buildings, cutting out landlords and property management companies. But the proposed rules only apply to new homes. A spokesperson for the Ministry of Housing said they know "far too many leaseholders" are being hit with "unreasonable and extortionate charges". A draft of the bill is expected later this year but leaseholders may have to wait months before it becomes law. 3 Leaseholders can challenge costs if they feel they are unreasonable, or if the standard of work is poor Credit: Getty HOW TO CHALLENGE FEES Leaseholders have a legal right within six months of receiving a summary of costs to request extra information from their landlord. You can challenge a cost if you think it's unreasonable, the standard of work is poor or you don't think you should be paying it. For example, you might question a fee for lift maintenance if you live in a ground-floor flat and it's not included in your lease. Or you could challenge charges for communal services, like a gym that's always closed or a concierge service that doesn't have staff. You will need to apply to a tribunal which has the power to rule on whether the service charge is reasonable or payable. In England this is the first-tier tribunal (property chamber). In Wales it's the leasehold valuation tribunal. Applying to the tribunal usually costs a fixed fee of £110, though this may be waived if you're on certain benefits. If your case is transferred from court to the tribunal, you'll only pay the difference between the court fees and the tribunal fee - or nothing if you've already paid more than £110 in court fees. If a hearing is scheduled, you'll need to pay an additional £220 hearing fee. Speak to the Leasehold Advisory Service online at or call them on 020 7832 2500 to find out more and get free advice on service charge issues. You could also apply to the Housing Ombudsman if you have a complaint about how your service charge fees have been managed. It says cases have jumped by 25 per cent in the last four years. If you're finding it hard to pay your service charges, there's support available. If you're on Universal Credit and have been receiving it for at least nine months, you could get help with your service charges if you own a leasehold property. People over the state pension age can also get support through pension credit. £5.3k charge but I waited months for vital repairs LAWYER Liam Spender, 41, thought he'd bought his dream home when he purchased his £591,000 two-bed flat six years ago. But within months it had turned into a nightmare. "I regret buying it to this day," said Liam, who lives in the Isle of Dogs, east London. Initially he paid a £4,200 a year service charge but it has rocketed to £5,300 in just four years - a 26% increase. A huge chunk of his bill - over £1,200 a year - was for buildings insurance, according to Liam. Yet, despite paying so much, Liam had to wait months for repairs after part of his flat's floor collapsed. To make matters worse, he discovered £300 of the insurance fee was being taken as commission by his landlord and their broker. In 2021, Liam teamed up with 103 homeowners in his building block and applied to the property tribunal. A few days before the case their landlord conceded and awarded the homeowners £100,000 in backdated commission payments. It meant that Liam got £300 back, while his neighbours in larger properties received significantly more. "There are millions of people like me in the same boat and they are owed money they don't even know about", said Liam, who has since founded Leaseholder Action to help other people being hit with secret commission fees. RIGHT TO MANAGE If you don't get anywhere by approaching your management company, you could take over managing the charges yourself via Right to Manage. It is a legal process where leasehold residents in flats can take over managing the maintenance and services. To do this, enough long-leaseholders (those with leases originally over 21 years) need to get together and form an RTM company. It costs £50 to set up a company and takes 24 hours to register. You then need to serve notice to the freeholder of the development - the person who owns the land - letting them know you are taking over the right to manage. They then have one month to dispute this. The government is also planning to remove the requirement for leaseholders to cover the landlords expenses during the process, which will save homeowners around £3,000. It's also not allowed if there are four or fewer flats and a landlord lives in the building. It could help you cut out management fee costs and charges for unnecessary work - but you will be responsible for the company and annual reporting. Unless one of you is trained in these areas you may need to take on an accountant or managing agent. Applications to set up RTM companies rose by 20% last year, according to Direct Line.
Telegraph
16-04-2025
- Business
- Telegraph
How to extend a leasehold and is it worth it?
More than three million households own leasehold flats in England and some, as the years tick by, face rising costs should they wish to extend the term of their lease. Owning a leasehold property means you don't own the ground your property stands on, known as the freehold. That is owned by the freeholder, who you may have to pay ground rent to. A lease gives you the right to occupy a property for a stipulated amount of time laid out in your contract. The amount of ground rent you pay, and whether this will rise in the future, is laid out in your lease and may be one of the reasons you decide to extend your leasehold term. Whether it is worth extending your lease depends on how many years you have remaining. A short lease can have a seriously detrimental impact on your home's value. When the term of the leasehold falls below 80 years, mortgage lenders may be reluctant to offer a loan backed by the property and it becomes more expensive to extend the term. Putting off a leasehold extension could stand between you and a decent remortgage deal, give you trouble when selling up and ultimately end up with you paying thousands of pounds more to your freeholder. Here, Telegraph Money lays out everything you need to know about extending your leasehold, the cost, and what to consider before going ahead. How to extend your leasehold Who can extend their leasehold? How long can you extend your leasehold for? How much does leasehold extension cost? What else to consider before extending your leasehold Should I extend my leasehold? How to extend your leasehold There are a few steps you'll need to follow to extend your leasehold. Get your paperwork ready. You'll need a copy of your lease, ground rent demand and, if your home was formerly shared ownership, the memorandum of staircasing to show you're the sole owner. Have your property valued. It's a good idea to instruct an independent surveyor to do this. Gather several quotes. Costs can vary, so get two or three quotes from solicitors for the cost of extending your lease. Instruct a solicitor, who'll start the process. Your solicitor will serve notice on the freeholder to extend the lease and put forward your opening offer for the amount you want to pay. Negotiate. You're likely to receive a counter-offer, if so – negotiations begin for not only the cost of the extension (premium) but the freeholder's fees too which you're liable to pay. Agree a price. Once this is done, the lease agreement can be drawn up. Once the draft lease is received and reviewed by your solicitor, your premium is paid to the freeholder and the lease is registered at the Land Registry. Who can extend their leasehold? Since January 31 this year, under the Leasehold and Freehold Reform Act 2024, all registered owners of the property have the right to extend their leasehold. Prior to this, you could only extend your leasehold if you had owned the property for at least two years. The exception to this is shared ownership. If the housing association still owns a share of your property you cannot apply to extend the lease. How long can you extend your leasehold for? Leaseholders have a statutory right to claim a 90-year lease extension with the removal of ground rent and with no adverse changes to the lease at a fair price and within a set timeline. These rights are guaranteed when a formal lease extension is being carried out which starts by serving a section 43 notice under the 1993 Act. Be wary of anyone offering to enter into an informal lease extension because none of these rights, including the number of years you are adding to the leasehold, are protected. When the 2024 act is fully implemented the standard lease extension will increase to 990 years. How much does a leasehold extension cost? This all depends on the number of years remaining on the lease. If there are less than 80 years left, the cost of the extension goes up and keeps rising as the leasehold gets shorter due to the calculation of what's called 'marriage value'. This is the difference between the value of your property with its short lease and its value after the extension. Marriage value is set to be abolished under the new act. For example, the cost of a typical lease extension for a £200,000 flat with 85 years left on the lease and a £100 ground rent which increases every 33 years is about £5,500, according to lease extension specialists Homehold. The cost will vary dramatically depending on the property value and the amount of ground rent payable. If the lease was to drop to 79 years on the same flat, your bill would rise to around £13,000. By the time it has 60 years remaining, it would be about £28,000. Professional fees would be charged on top of this, which are typically £5,000. Deciding not to extend and selling your home with a short lease will not mean you save on the expense, explains Homehold's managing director Linz Darlington. 'If you've got a lease below around 100 years, a buyer will want to knock off the cost of the lease extension, including the fees, from the asking price at the very least,' he said. 'They'll also want to reduce their offer even further to take into account the hassle of the extension. 'Once a lease has dropped to 60 years, you're going to be limited to investment buyers purchasing with cash – and they're going to want to reduce the price enough to make a significant profit from the transaction.' What else to consider before extending your leasehold Lease extensions take around a year to complete, so don't begin the process just as you put your home on the market. You can cut the timescale short by skipping the negotiation step, but you could end up paying much more than you need to. Do you have the funds to pay for the extension and the freeholder's costs? The freeholder usually wants a 10pc deposit upfront, so get your finances in order first. Should I extend my leasehold? Getting rid of ground rent If your annual ground rent is above 0.1pc of the value of the property, or above £250 a year or if it rises too frequently, it can leave you not only with an unaffordable bill to pay each year but you could be frozen out of the best remortgage deals or find it difficult to sell your home. Mortgage lenders frequently have clauses in their contracts that stipulate they won't lend on properties with these terms. By extending your lease, you remove the requirement to pay ground rent. Extending while it's cheap There's an argument for extending a lease even if it still has between 90 and 100 years left, because this is when it will be at its cheapest. 'Whether what you want to sell or you're planning on keeping your flat, you should always extend your lease before it drops below 80 years because it's going to get a lot more expensive as the lease gets shorter and your property goes up in value,' added Mr Darlington. Waiting on the new reforms Although the Leasehold and Freehold Reform Act 2024 received royal assent in May last year, it has yet to be fully implemented. When it does, it will make it easier and cheaper for those with lease terms of less than 80 years to extend, but with further consultations and secondary legislation still to be waded through, it is not known when it will come into force. Anyone paying high ground rent and watching their lease get shorter as they wait for the act to be implemented should weigh up if it is worth waiting even longer or proceeding with an extension under the current rules.
Yahoo
02-04-2025
- Business
- Yahoo
Rip-off ground rents are another existential threat to leaseholders
Have you experienced lending, sale or affordability problems because of escalating ground rent? We'd like to here from you: money@ Leaseholders have been having a bad time of it lately. Not only have they had to suck up soaring service charge demands, many existing owners have come to realise Matthew Pennycook's promises of abolishing this feudal system, was nothing more than false hope. I hate to say this, because I also own leaseholds, but the situation looks like it's getting worse. Most owners will already know the importance of not allowing their lease to go below 80 years. That is the magic number, and if you're unlucky enough for your flat to fall below this threshold, then you'll end up having to pay an often extortionate 'marriage value' to the freeholders to extend the lease. This means the hypothetical profit that the leaseholder will make due to the lease extension is split equally with the freeholder. If you've done work and improved your property, it'll likely mean you'll pay even more to the freeholders, because it's probable your lease (when extended) will mean the property is worth even more – and they want their slice of the pie. As the leaseholder, you will also have to pay all of the freeholder's costs (including their surveyor's and solicitor's expenses) but as an 'added bonus', you will also have to pay all of your own costs on top of that too. I would say leasehold is the gift that keeps on giving, but that's only if you're a freeholder. Unfortunately, this unfair, antiquated and ridiculous system that sees freeholders get rich off the backs of leaseholders is what the Leasehold and Freehold Reform Act 2024 was meant to tackle, but as it's still yawning its way through Parliament, I'm not holding my breath. Last year the Government admitted leasehold reform could take up to five years. In fact, and I hate to be such a neg-head, but I think this whole leasehold saga is about to get a whole lot worse because of the spectre of ground rent escalation. Ground rent, in simple terms, is a fee the leaseholder pays the freeholder for the right to occupy the land on which their property stands. The freeholder doesn't provide any services in return for the payment of ground rent, and the Competition and Markets Authority (CMA) has also concluded that ground rent is neither 'legally nor commercially necessary'. Despite ground rents being abolished in the Leasehold Reform (Ground Rent) Act 2022, which came into effect on 30 June 2022, that was only for new long leases. If you have a lease from before then (and there are millions), none of this helps. If you read the small print in your lease, you'll most likely see the freeholder can increase the ground rent every 25 years. Some may detail a fixed amount, while others have a 'doubling clause'. If your tummy is looping and you're feeling nauseous while reading this, it's understandable. The calamity around the corner is that many leaseholders with existing ground rents will find their leases both unmarketable and unmortgageable. The banks are quickly cottoning on to this and are now refusing to lend on leaseholds with excessive ground rents, especially those with escalating clauses. The most worrying aspect is that ground rents remain unregulated, leaving the door open to ever-increasing charges. So, what is the Government doing? Labour have said they will draft a Bill this year which regulates ground rents (but doesn't necessarily abolish them). There have also been proposals that ground rent would be capped to 0.1pc of capital value (for example, a maximum ground rent of £250 would be payable on a property worth £250,000), but nothing has yet been decided. What has happened since – in an unsurprising twist – is that a group of freeholders have launched legal proceedings against the Government on the basis that these reforms will infringe their human rights. Thus far, they have been granted leave to apply for a judicial review to challenge the threat to their income streams, with this set to take place before the end of July 2025. Given billions of pounds are at stake, this will be a behemoth of a battle. In November last year, Matthew Pennycook said: 'Millions of homeowners across the country will remember with fondness the sense of satisfaction, pride and security they felt when completing the purchase of their first home… Yet, for far too many leaseholders, the reality of home ownership has fallen woefully short of the dream – their lives marked by an intermittent, if not constant, struggle with punitive and escalating ground rents; unjustified permissions and administration fees; unreasonable or extortionate charges; and onerous conditions imposed with little or no consultation. This is not what home ownership should entail.' I don't think there's a leaseholder in the land that would disagree with him, now it's time we see action. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
Telegraph
02-04-2025
- Business
- Telegraph
Rip-off ground rents are another existential threat to leaseholders
Have you experienced lending, sale or affordability problems because of escalating ground rent? We'd like to here from you: money@ Leaseholders have been having a bad time of it lately. Not only have they had to suck up soaring service charge demands, many existing owners have come to realise Matthew Pennycook's promises of abolishing this feudal system, was nothing more than false hope. I hate to say this, because I also own leaseholds, but the situation looks like it's getting worse. Most owners will already know the importance of not allowing their lease to go below 80 years. That is the magic number, and if you're unlucky enough for your flat to fall below this threshold, then you'll end up having to pay an often extortionate 'marriage value' to the freeholders to extend the lease. This means the hypothetical profit that the leaseholder will make due to the lease extension is split equally with the freeholder. If you've done work and improved your property, it'll likely mean you'll pay even more to the freeholders, because it's probable your lease (when extended) will mean the property is worth even more – and they want their slice of the pie. As the leaseholder, you will also have to pay all of the freeholder's costs (including their surveyor's and solicitor's expenses) but as an 'added bonus', you will also have to pay all of your own costs on top of that too. I would say leasehold is the gift that keeps on giving, but that's only if you're a freeholder. Unfortunately, this unfair, antiquated and ridiculous system that sees freeholders get rich off the backs of leaseholders is what the Leasehold and Freehold Reform Act 2024 was meant to tackle, but as it's still yawning its way through Parliament, I'm not holding my breath. Last year the Government admitted leasehold reform could take up to five years. In fact, and I hate to be such a neg-head, but I think this whole leasehold saga is about to get a whole lot worse because of the spectre of ground rent escalation. Ground rent, in simple terms, is a fee the leaseholder pays the freeholder for the right to occupy the land on which their property stands. The freeholder doesn't provide any services in return for the payment of ground rent, and the Competition and Markets Authority (CMA) has also concluded that ground rent is neither 'legally nor commercially necessary'. Despite ground rents being abolished in the Leasehold Reform (Ground Rent) Act 2022, which came into effect on 30 June 2022, that was only for new long leases. If you have a lease from before then (and there are millions), none of this helps. If you read the small print in your lease, you'll most likely see the freeholder can increase the ground rent every 25 years. Some may detail a fixed amount, while others have a 'doubling clause'. If your tummy is looping and you're feeling nauseous while reading this, it's understandable. The calamity around the corner is that many leaseholders with existing ground rents will find their leases both unmarketable and unmortgageable. The banks are quickly cottoning on to this and are now refusing to lend on leaseholds with excessive ground rents, especially those with escalating clauses. The most worrying aspect is that ground rents remain unregulated, leaving the door open to ever-increasing charges. So, what is the Government doing? Labour have said they will draft a Bill this year which regulates ground rents (but doesn't necessarily abolish them). There have also been proposals that ground rent would be capped to 0.1pc of capital value (for example, a maximum ground rent of £250 would be payable on a property worth £250,000), but nothing has yet been decided. What has happened since – in an unsurprising twist – is that a group of freeholders have launched legal proceedings against the Government on the basis that these reforms will infringe their human rights. Thus far, they have been granted leave to apply for a judicial review to challenge the threat to their income streams, with this set to take place before the end of July 2025. Given billions of pounds are at stake, this will be a behemoth of a battle. In November last year, Matthew Pennycook said: 'Millions of homeowners across the country will remember with fondness the sense of satisfaction, pride and security they felt when completing the purchase of their first home… Yet, for far too many leaseholders, the reality of home ownership has fallen woefully short of the dream – their lives marked by an intermittent, if not constant, struggle with punitive and escalating ground rents; unjustified permissions and administration fees; unreasonable or extortionate charges; and onerous conditions imposed with little or no consultation. This is not what home ownership should entail.' I don't think there's a leaseholder in the land that would disagree with him, now it's time we see action.
Telegraph
29-03-2025
- Business
- Telegraph
The small print that turned one million flat owners into mortgage prisoners
Sky-high ground rent charges are turning flat owners into 'mortgage prisoners', experts have warned. Nearly one million leases have escalating ground rents, according to the Competition and Markets Authority (CMA), meaning the annual charge increases over time. Mortgage lenders often require certain conditions to be met before lending against these properties – for example, the annual ground rent cannot exceed 0.1pc of the property's value. However, experts said 'toxic' increases led by high inflation in recent years had left some flat owners trapped in 'unsellable properties'. Ground rent is an annual fee paid by leaseholders to the freeholder for the right to occupy the land their property is built on. Earlier this month, the Government introduced a white paper replacing leasehold systems, where third-party landlords owning the building belonging to several flats will be replaced with 'commonhold' schemes, which will give all owners more control over the buildings they live in. In addition, new buildings will no longer pay 'ground rent'. While the Leasehold and Freehold Reform Act 2024, passed under the previous government but not yet fully in force, includes some ground rent measures, neither a £0 or £250 cap have been legislated for. Britain's consumer watchdog, the CMA, has separately banned freeholders and developers from ground rent clauses that double the payment every review period; however, they can still increase them by the retail price index (RPI). Over the past few years, the RPI rose rapidly and spiked at 14pc in November 2022. Paula Higgins, of the Homeowners Alliance said: 'The CMA rightly stamped out doubling ground rents, but now some lenders are refusing mortgages on properties with RPI-linked increases or rent reviews every 10 years or less. What once seemed reasonable has become toxic under high inflation, trapping hard-working homeowners in unsellable properties.' For example, if your ground rent was charged at £290 a year in January 2020, it would rise with the RPI to £391 this year, an increase of 35pc, and would require the property to be worth over £391,000 in value to be compliant with lenders' terms. Nicholas Mendes, of brokerage John Charol, said ground rents were becoming 'more topical' with lenders. Mr Mendes said: 'Lenders are more aware of it from their level, looking at it and giving brokers the right guidance.' He added that many borrowers have opted to use product transfers in recent years that do not require their property to be revalued. However, he said that when the market settles in 'a year or two, more issues will come to light'. Leaseholders in a 122-flat development in Illford, east London, are subject to ground rent charges that increase every five years by the retail price index (RPI). The charge, which is in breach of most banks' lending terms, means the homeowners can no longer sell or remortgage. The freeholder, The Freehold Corporation, has Labour peer, Lord Carter of Coles, as a director. The company collects the payment through its operating company Emerald Ground Rent. David Hollingworth, of brokerage L&C, said: 'Lenders will have general guidelines around what clauses are likely to be acceptable. That's put an end to the doubling of ground rent every five years that was so problematic for some. 'Being linked to RPI can be acceptable but anything that could be seen as enough to affect the 'marketability' of the property. The valuation could pick up on an onerous ground rent which would affect the lender's security and so could result in a decline by the mortgage lender.' Harry Scoffin, the founder of the campaign group Free Leaseholders, added: 'Onerous ground rent is destroying people's homes, money and lives. It is also jamming up the flats market as a number of lenders refuse to mortgage them. Ground rent victims are the new mortgage prisoners. 'According to the latest Competition and Markets Authority data, around 940,000 leases have escalating ground rents. In its investigations, the CMA has also raised eyebrows at some RPI clauses. 'We know of increasingly desperate leaseholders trying to extend their leases or buy the freehold to remove onerous ground rents, but it's punitively expensive. Leaseholders who come to us just don't have a spare £20,000 lying around at the back of their sofa.' An MHCLG spokesman said: 'Far too many leaseholders across the country struggle with punitive and escalating ground rents. 'We remain firmly committed to tackling unregulated and unaffordable ground rents, and we will deliver this in legislation, with further details set out in due course.'
