A shocking story reported on the BBC today has highlighted how thousands of owners of new-build homes are being hit with unexpected costs when they go to buy the freehold.
When Katie Kendrick bought her new-build home in Cheshire three years ago for £214,00 from developers Bellway, she was told that there was a 150-year leasehold on the property. This meant that she owns the property outright for 150 years.
Ms. Kendrick claims the sales representative told her that it was "as good as freehold" (i.e. a property owned outright) because of the long lease.
She says she was told she’d be able to buy her freehold after two years, believing the cost to be between £2,000 and £4,000.
A year and a half later, however, Bellway wrote and advised Ms. Kendrick that the freehold had been sold on to an investment company – who were quoting £13,300 for her to buy the freehold.
But it isn’t just Bellway that are selling homes as leasehold, then selling the freehold on to an investment company – many UK new homes builders are doing the same thing.
In October 2016, the Guardian ran a similar story, stating that around 6,000 new houses were sold as leasehold in 2015. While not all house builders use this model, those that do argue it helps make developments financially viable.
According to the BBC, it is not illegal to sell a new home as leasehold, then sell the freehold separately to an investment company without informing the family living there.
A spokesman for the Department of Communities and Local Government, however, told the BBC "it is unacceptable if home buyers are being exploited with unfair charges and unfavourable ground rent agreements prior to purchase.
"We are aware of this issue and will announce radical proposals to reset the housing market in our forthcoming White Paper.”