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New Build Leasehold Scandal Claims

Do you feel you were mis-advised in relation to your house purchase?

A photo of Mrs Swaffield

I am very happy and satisfied with the settlement you achieved for me and the service was excellent and thank you very much

Mrs E.Swaffield
Loughborough

Making a leasehold property claim

Do you feel you were mis-advised in relation to your house purchase?

Have you purchased a new-build leasehold property only to now find out that your ground rent will double every few years?

Did you think you could buy the freehold only to now find out it will cost thousands of pounds more than you were first told?

Up and down the country, buyers of new-build, leasehold homes are finding themselves faced with huge increases in ground rent and are discovering that the cost of owning the freehold may be wholly out of reach.

Many of these homeowners now believe that they were ‘mis-sold’ their properties.

The old adage an “Englishman’s home is his castle” may be under threat by the practices of new build property developers selling properties on a leasehold basis and purchasers not being fully advised of the implications of this.

There are two aspects of this that could come back to bite purchasers further down the line: increases in rent being paid to the freeholder; and being quoted extortionate prices to purchase the freehold.

When you buy your new home, you expect to own the bricks, mortar, roof and the land that the house is built upon. Unfortunately, some developers are only selling these properties on a leasehold (or what they have called a “virtual freehold”) basis, which means that you lease the property for the period stated – anywhere between 40 and 999 years, but usually around 125 years.

In some cases, the new owner was not advised about the rate at which their annual ground rent would increase.  We have seen cases where what started out at £250 per year doubled every 10 years.  This may not seem much now, but in 20 years time when it is £1,000 per year and you can’t sell the property because of this annual expense, things seem quite different.  As well as the ground rent charges, the freeholder can also control things like the utilities suppliers, making it difficult for the owner to switch electricity supplier, and buildings’ insurance.

There are also cases where the purchaser has been told they could buy the freehold for the property for £2,000 - £5,000.  The owner has then saved up to do this and 18 months later has contacted the developer to tell them they now want to buy the freehold.  However, the developer has sold the freehold to someone else, and when the owner contacts them they are told the cost has risen to £34,000.

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Our expert team will call you...

Our Financial, Property and Professional Claims team is headed by senior solicitor Claire Critchley who has over 10 years’ experience dealing with complex legal claims against a variety of professionals.

This includes claims against surveyors, architects, estate agents and solicitors, in addition to dealing with financial disputes involving mis-sold mortgages and interest rate swaps.

Request a callback that suits you

When would you like us to call?

This is not about a claims culture. We just want to defend the rights of the people who are suffering because of this.

Claire Critchley

Head of Professional Negligence

What our customers say

Mrs. Vora's portrait

“I found the staff to be friendly, helpful, courteous and they kept me well informed on a regular basis”

Mrs. Vora,
Loughborough

A photo of Mr Dowse

“They acted in a sympathetic and professional manner and resolved my case very efficiently”

Mr Dowse
Leeds

  For a confidential chat, call one of our experts today 0151 550 5228

10 simple steps to claim

Step
1
Understanding what went wrong
Step
2
Reviewing relevant documents
Step
3
Obtaining an initial response to your grievance
Step
4
Sending the Letter of Claim
Step
5
The professional’s detailed response
Step
86
Issuing court proceedingsTaking a detailed statement
Step
7
Obtaining experts’ reports
Step
68
Taking a detailed statementIssuing court proceedings
Step
9
Attending your court trial
Step
10
Awarding your compensation claim

Your questions... answered

What is freehold?

Freehold means:

  • You own the building and the land it stands on until you sell it.
  • You don’t have to pay any rent to anyone else.
  • You are solely responsible for any repairs and upkeep on the property.
  • You can make alterations (subject to any planning laws) without asking the consent of anyone else.

What is leasehold?

A leasehold means:

  • You have a lease from the person that owns the freehold.
  • You own the right to occupy the property during a specific period
  • You do not own the property itself. This is a form of contract which sets out the rights and responsibilities of you and the landlord.
  • You will pay an annual 'ground rent” to the landlord.
  • You will have to pay a “service charge” to the landlord or their agent for the upkeep of common areas and the external walls of the property.
  • You must obtain the landlord’s permission before you make any alterations to the property.
  • You may have other restrictions, such as not owning pets
  • If you don’t keep to your obligations (for example, by not paying the ground rent), the landlord can take back the property.

What losses can I claim?

You are entitled to claim for losses you have suffered as a direct consequence of the incorrect advice you may have been given. You must demonstrate that the losses you are claiming are directly attributable to the actions of the defendant you are claiming against – e.g. that you would have bought the freehold earlier had you known it might be sold to someone else and cost you many times more than you initially thought it would.

How long will the claim take?

It can be very difficult to estimate how long a claim will take from start to finish as each claim is unique.  We will keep you informed every step of the way, but we do advise it may take over 2 years from when notification of the claim is first made to it reaching trial. Of course, since your home will be the most important purchase you make, it is worthwhile for peace of mind.

Do I have to pay anything up front?

No. We are currently retaining clients on a ‘No Win, No Fee’ basis, meaning you will only have to pay us if the case is successful. (for a further explanation, please see our page entitled Conditional Fee Agreement).

Are you not personal injury solicitors?

Yes, we are.  But we also specialise in professional negligence and property claims.  We have a dedicated team that deals solely with these types of cases.

I am thinking of joining up. Is there anything I should be doing at this stage?

Once you have signed with us as a client, we will contact you to explain what next steps we will take and what next steps you will need to take to assist us with investigating your claim. However at this stage we recommend that you retain all the paper and electronic records that you hold in relation to your purchase of the property and any sales material you were given by the developer (where possible).

Please also note that any advice, information, or documents produced by our legal team directly to you concerning the progress of the claim and/or its merits must not be reproduced or reported on social media or forums/bulletin boards. Such information will be confidential and privileged and must not be reproduced or placed in the public domain. It may harm your claim if it is seen by the other side.

I don't intend to sell my house just yet. So why should I worry?

Whilst you may be happy in your home at the moment, the problems associated with a leasehold property may be more relevant if/when you come to sell your property.  It may not be worth what you thought, it may even have decreased in value because of the rising ground rent and/or reduced term left on the lease. Potential purchasers may also struggle to get a mortgage to help them buy the property for the same reasons.

Who will cover my legal fees if I don't win the case?

You may already have a policy of insurance that covers your legal expenses in place which may cover you for a claim of this type (sometimes referred to as “Before the Event”/”BTE” insurance). If not, we will put in place an After the Event (ATE) insurance policy to provide cover for this possibility.  The premium for this policy will only be payable if your case is successful.  If you are successful, the premium will be payable out of any damages you are awarded and will not be recoverable directly from the other side.

How long do I have to bring a claim?

You must start court proceedings within 12 years of signing the lease for any claim against the developer.  For any claim against your solicitor, the claim must be started within 6 years of when you acted  their advice.  Failure to commence your claim within these periods may mean that you are likely to lose your right to claim damages and you will run the risk of not receiving any compensation.

Will I need to go to court?

Very few claims reach the stage of trial as most settle before the court hearing.  We will endeavour to settle your claim as quickly as possible before trial, but always balancing this against the quality of the deal available.  However, as a matter of best practice, if court proceedings do become necessary in your case, you should proceed on the assumption that the case will go to trial.  We will be with you every step of the way and will explain what will happen at court if your case goes to trial.

What is virtual freehold?

Many leasehold properties were advertised as being a 'virtual freehold' as the lease was for 999 years.  Some people were told a 'virtual freehold' is as good as a freehold because of the length of the lease and were re-assured by this.  Legally there is no such thing as a “virtual freehold”. It is no different to a leasehold, and will have exactly the same obligations on the owner in terms of ground rent, service charges and obtaining consent from the landlord.

What is escalating ground rent?

Escalating ground rent means that the money you pay to the owner of your freehold increases over time, this is usually every decade. This is a term most often used to describe ground rents that increase drastically, for example, those that double every ten years.

If you are facing escalating ground rents that have affected the value of your home and that were not explained to you by the developer or your solicitor, you may be able to pursue a leasehold claim.

What is leasehold enfranchisement?

Leasehold enfranchisement is simply a term used to describe buying the freehold of your property. The Leasehold Reform Act 1967 gives you ‘the right to enfranchisement’, meaning that if certain conditions are met, the leaseholder has the right to compulsorily purchase the freehold even if the freeholder does not wish to.

What is a service charge?

The service charge is a fee associated with the maintenance and upkeep of communal or public areas of your estate, such as green areas, roads, and car parks. This fee exists because the public areas of your estate have not been handed over to your local council for care and upkeep, and you are paying for a private company to carry out any required work instead. Therefore, it is possible to own the freehold of your home and still be required to pay a service charge for maintenance.

Service charges are separate from your lease, and while your lease will contain an obligation for you to pay the service charges, it will not govern the extent of those service charges.  Any complaint regarding the amount of your service charge should be addressed with the estate management company.

What are restrictive covenants?

A covenant is a legal restriction as to how you can use or enjoy your property.  The aim is often said to be to ensure that the value of the property and neighbouring properties are not affected by, for example, one person allowing their front garden to become overgrown.   And so the freeholder, or whoever has the benefit of the restrictions, may seek to enforce the covenants to maintain the value of their property.  In extreme cases, this could lead to forfeiture of your lease, which means the freeholder can forcibly take possession of your property for non-compliance with the terms of the lease.

Many restrictive covenants require you to obtain the permission or consent of the freeholder before you can do something, and often the Landlord charges an assessment or consent fee for considering any requests, thus adding further expense.  Leaseholders have, in some cases, found extreme restrictions placed upon them, such as not being able to keep a caravan at the property (even on your own drive), a limit on the number of vehicles per house and restrictions on the building of conservatories or porches. Building additions will often require permission, not just for the ability to build, but also approval for the overall design and size even if the local Council has already agreed your building plans.

To find out if we assist with your difficult leasehold situation, please contact us for a free initial telephone call.

What is a freehold management company?

Historically, a freeholder would be the council or a specific landowner, but freeholds are now being sold on as investment opportunities to “property management companies”, or “freehold management companies”, whose main priority is often a return on their investment.  These “investors” benefit from the high ground rents, consent fees relating to restrictive covenants, and the increase in value of the land generally.  When a leaseholder tries to buy their freehold, the investor only agrees to sell based on a sum that takes into account the escalating ground rents that they will miss out on by selling the freehold.

House prices can be seriously affected by the actions of these freehold management companies, and there can sometimes be as much as 15% difference between two identical properties save for one being freehold and the other leasehold.

If you have a case that you chose to pursue with us, the claim will likely be against the solicitor that acted for you on the purchase of the property.  This is because the solicitor should have made sure you were aware of the additional obligations a leasehold property has and should not have allowed you to enter into an agreement that is detrimental to you.

Freehold means:

  • You own the building and the land it stands on until you sell it.
  • You don’t have to pay any rent to anyone else.
  • You are solely responsible for any repairs and upkeep on the property.
  • You can make alterations (subject to any planning laws) without asking the consent of anyone else.

A leasehold means:

  • You have a lease from the person that owns the freehold.
  • You own the right to occupy the property during a specific period
  • You do not own the property itself. This is a form of contract which sets out the rights and responsibilities of you and the landlord.
  • You will pay an annual 'ground rent” to the landlord.
  • You will have to pay a “service charge” to the landlord or their agent for the upkeep of common areas and the external walls of the property.
  • You must obtain the landlord’s permission before you make any alterations to the property.
  • You may have other restrictions, such as not owning pets
  • If you don’t keep to your obligations (for example, by not paying the ground rent), the landlord can take back the property.

You are entitled to claim for losses you have suffered as a direct consequence of the incorrect advice you may have been given. You must demonstrate that the losses you are claiming are directly attributable to the actions of the defendant you are claiming against – e.g. that you would have bought the freehold earlier had you known it might be sold to someone else and cost you many times more than you initially thought it would.

It can be very difficult to estimate how long a claim will take from start to finish as each claim is unique.  We will keep you informed every step of the way, but we do advise it may take over 2 years from when notification of the claim is first made to it reaching trial. Of course, since your home will be the most important purchase you make, it is worthwhile for peace of mind.

No. We are currently retaining clients on a ‘No Win, No Fee’ basis, meaning you will only have to pay us if the case is successful. (for a further explanation, please see our page entitled Conditional Fee Agreement).

Yes, we are.  But we also specialise in professional negligence and property claims.  We have a dedicated team that deals solely with these types of cases.

Once you have signed with us as a client, we will contact you to explain what next steps we will take and what next steps you will need to take to assist us with investigating your claim. However at this stage we recommend that you retain all the paper and electronic records that you hold in relation to your purchase of the property and any sales material you were given by the developer (where possible).

Please also note that any advice, information, or documents produced by our legal team directly to you concerning the progress of the claim and/or its merits must not be reproduced or reported on social media or forums/bulletin boards. Such information will be confidential and privileged and must not be reproduced or placed in the public domain. It may harm your claim if it is seen by the other side.

Whilst you may be happy in your home at the moment, the problems associated with a leasehold property may be more relevant if/when you come to sell your property.  It may not be worth what you thought, it may even have decreased in value because of the rising ground rent and/or reduced term left on the lease. Potential purchasers may also struggle to get a mortgage to help them buy the property for the same reasons.

You may already have a policy of insurance that covers your legal expenses in place which may cover you for a claim of this type (sometimes referred to as “Before the Event”/”BTE” insurance). If not, we will put in place an After the Event (ATE) insurance policy to provide cover for this possibility.  The premium for this policy will only be payable if your case is successful.  If you are successful, the premium will be payable out of any damages you are awarded and will not be recoverable directly from the other side.

You must start court proceedings within 12 years of signing the lease for any claim against the developer.  For any claim against your solicitor, the claim must be started within 6 years of when you acted  their advice.  Failure to commence your claim within these periods may mean that you are likely to lose your right to claim damages and you will run the risk of not receiving any compensation.

Very few claims reach the stage of trial as most settle before the court hearing.  We will endeavour to settle your claim as quickly as possible before trial, but always balancing this against the quality of the deal available.  However, as a matter of best practice, if court proceedings do become necessary in your case, you should proceed on the assumption that the case will go to trial.  We will be with you every step of the way and will explain what will happen at court if your case goes to trial.

Many leasehold properties were advertised as being a 'virtual freehold' as the lease was for 999 years.  Some people were told a 'virtual freehold' is as good as a freehold because of the length of the lease and were re-assured by this.  Legally there is no such thing as a “virtual freehold”. It is no different to a leasehold, and will have exactly the same obligations on the owner in terms of ground rent, service charges and obtaining consent from the landlord.

Escalating ground rent means that the money you pay to the owner of your freehold increases over time, this is usually every decade. This is a term most often used to describe ground rents that increase drastically, for example, those that double every ten years.

If you are facing escalating ground rents that have affected the value of your home and that were not explained to you by the developer or your solicitor, you may be able to pursue a leasehold claim.

Leasehold enfranchisement is simply a term used to describe buying the freehold of your property. The Leasehold Reform Act 1967 gives you ‘the right to enfranchisement’, meaning that if certain conditions are met, the leaseholder has the right to compulsorily purchase the freehold even if the freeholder does not wish to.

The service charge is a fee associated with the maintenance and upkeep of communal or public areas of your estate, such as green areas, roads, and car parks. This fee exists because the public areas of your estate have not been handed over to your local council for care and upkeep, and you are paying for a private company to carry out any required work instead. Therefore, it is possible to own the freehold of your home and still be required to pay a service charge for maintenance.

Service charges are separate from your lease, and while your lease will contain an obligation for you to pay the service charges, it will not govern the extent of those service charges.  Any complaint regarding the amount of your service charge should be addressed with the estate management company.

A covenant is a legal restriction as to how you can use or enjoy your property.  The aim is often said to be to ensure that the value of the property and neighbouring properties are not affected by, for example, one person allowing their front garden to become overgrown.   And so the freeholder, or whoever has the benefit of the restrictions, may seek to enforce the covenants to maintain the value of their property.  In extreme cases, this could lead to forfeiture of your lease, which means the freeholder can forcibly take possession of your property for non-compliance with the terms of the lease.

Many restrictive covenants require you to obtain the permission or consent of the freeholder before you can do something, and often the Landlord charges an assessment or consent fee for considering any requests, thus adding further expense.  Leaseholders have, in some cases, found extreme restrictions placed upon them, such as not being able to keep a caravan at the property (even on your own drive), a limit on the number of vehicles per house and restrictions on the building of conservatories or porches. Building additions will often require permission, not just for the ability to build, but also approval for the overall design and size even if the local Council has already agreed your building plans.

To find out if we assist with your difficult leasehold situation, please contact us for a free initial telephone call.

Historically, a freeholder would be the council or a specific landowner, but freeholds are now being sold on as investment opportunities to “property management companies”, or “freehold management companies”, whose main priority is often a return on their investment.  These “investors” benefit from the high ground rents, consent fees relating to restrictive covenants, and the increase in value of the land generally.  When a leaseholder tries to buy their freehold, the investor only agrees to sell based on a sum that takes into account the escalating ground rents that they will miss out on by selling the freehold.

House prices can be seriously affected by the actions of these freehold management companies, and there can sometimes be as much as 15% difference between two identical properties save for one being freehold and the other leasehold.

If you have a case that you chose to pursue with us, the claim will likely be against the solicitor that acted for you on the purchase of the property.  This is because the solicitor should have made sure you were aware of the additional obligations a leasehold property has and should not have allowed you to enter into an agreement that is detrimental to you.