Earlier this year, the Telegraph mentioned in an article on their site that figures they had received pointed to an increase in the number of homes for the elderly and newly built flats are being sold as leasehold, and not as freehold. With Britain building up more homes and flats now more than ever, is the number of properties that are being sold as leasehold a good sign for the economy or a bad symptom of the housing crisis?
As reported by the article, according to statistics produced by the Land Registry, leasehold properties made up 43% of all new-build registrations in 2015, compared to 22% in 1996. Sebastian O’Kelly, a director of Leasehold Knowledge Partnership, was quoted saying: ”We are producing huge swathes of new leasehold homes. Older people are being encouraged into retirement flats, but these are nearly all leasehold.” These new homes are added to the 4 million already under a leasehold tenure, which warrants purchasers to pay an annual ground rent to the freeholder, as well as additional fees, for example, to sublet, alter, or extend the lease. And when the property is bought or sold, extra fees will be levied, which could run into thousands of pounds.
The issue that now arises with these properties is that it is putting many new buyers out of pocket, as they are having to pay extra in service charges in order to pay for maintenance of the property. Louie Burns, managing director of Leasehold Solutions, said: ”Unfortunately, if you work in many of our big cities and can only afford a flat, you will have no option but to buy leasehold.” This seems to put many at a disadvantage, especially within London, which boasts the highest rates of leasehold properties compared to the rest of the UK.
Some purchasers may not be happy with their landlord or property management company, so can opt for right to buy out the freeholder through a collective enfranchisement, which is where residents can come together to take over the freeholder, or, alternatively, they can choose the right to manage route.
Mr Burns, mentioned earlier, stated: ”The appetite among flat owners for buying out their freehold is enormous, usually because they are unhappy with the services they are getting from the freeholder or his agent, or the charges they are paying. I’d always recommend buying your freehold, but it is not an easy process.” Right to manage can provide an easier solution as the cost is far lower.
The increase in leasehold seems to have had a choke hold effect on the housing crisis, and many are forced into this option if they are unable to afford their own properties out right. We may see this trend continuing in the future, so a close eye is needed on the housing market from now on.