The Ground Rent problem and why it won’t go away

18th December 2018

Developers should be transparent with Leasehold Information

Britain has had leasehold homes for hundreds of years, but in 2017 the ground rent scandal hit the headlines and despite rising awareness, it is a problem that just will not go away.

What are leasehold houses?

In the UK houses were traditionally sold as freehold, giving the buyer total control over their property.  The buyer of a leasehold house is effectively only buying the building, with control of the land on which it is built, remaining in the hands of the freeholder – typically the developer.

The home buyer has to pay an annual ‘ground rent’ to the freeholder and has to ask them for permission to make changes to the property, like adding a conservatory.

What is the problem?

Leasehold property owners were generally charged just a small ground rent, which many freeholders did not bother to collect.  Recently though, developers started claiming ground rents of £200-£400 a year, with the figure doubling every ten years.

Unsuspecting first-time buyers were frequently told the 999-year leases were ‘virtually freehold’, yet the ground rent would soon spiral to ridiculous levels – some houses will attract ground rents around £10,000 a year by 2060.

The Government has now proposed a total ban on new build leasehold homes.  Recently the Law Commission proposed new rules that could give leaseholders the right to purchase unlimited longer lease extensions without a ground rent.

Industry body pressing for change

Now, with reforms under discussion, the Conveyancing Association (CA) says all managing agents and freeholders should be able to provide current and relevant leasehold information within ten working days.

The CA also claims the maximum fee chargeable should be between £150 and £300 to provide all the necessary Leasehold Property Enquiries (LPE1) data, depending on the complexity of the estate.

The Leasehold reform discussion is ensuring the government is looking for ways to improve the way leasehold property is marketed.

Most unhappy homeowners are suffering because many of the issues related to buying a leasehold property were not made overtly clear or were ignored entirely during the buying process – some buyers have claimed deliberate mis-selling on the part of developers.

Numbers reveal scale of problem

Recent reports found that a staggering 94% of respondents now regret buying a leasehold property, although the house appeared to cost less at the time than a similar freehold alternative.

Most claim this is due to the deceptive language and sales tactics used by developers, with 42% of respondents sold the property based on the ambiguous language of it being a ‘virtual freehold’.

The survey revealed 24% of those who bought unaware of the issues with a leasehold property, did not have their misconception corrected throughout the house selling process. Even more worrying perhaps is the 11% who were sold their house on the advice the property was ‘just like a freehold’.

The report found 57% of respondents bought their property without understanding what a leasehold property was, given the information was misrepresented or completely manipulated, which has led to calls for more stringent reforms.

The new reforms will require property developers and managing agents to make terms and conditions explicitly clear to the buyer during the process and well before completion. Developers should also make it clear to buyers if their property is exempt from the current leasehold reforms.

What you can do

If you bought your property on or after 1 October 2015 you are covered by the ‘Consumer Rights Act 2015’ and it applies to the terms of the lease you agreed. If you can prove the full financial implications of the lease term were not explained to you in detail, it would no longer be binding.

If you bought your property before 1 October 2015 you are covered by the ‘Unfair Contract Terms Act 1977’ and you could get legal relief from the terms if you can prove they are unfair.

You should also consider whether your solicitor clearly informed you about the real implications of the terms of this lease when you were purchasing the property? If they didn’t you could have a claim against them for professional negligence. Did you use the solicitor recommended by the developer?

Private Members Bill: Ground Rents and Leasehold Properties

A private members bill introduced by MP Eddie Hughes on the issue of ground rents within the leasehold sector passed its first reading on 25th June 2019.

The Bill intends to:

  • Create a legal obligation on freeholders to grant a quick and simple lease variation to leaseholders where ground rent prohibits a sale,
  • Cap ground rents at the lower of £250 per annum or 0.1% of the property value,
  • Consider a new obligation on the original property developer to foot the leaseholder’s legal bills when varying certain ground rent contracts.

The Bill is now due to pass to a second reading; however, a date has not yet been scheduled.

Whatever the problem, here at Ansons we have a team of dedicated professionals who can help you understand what options you have and how best to move forward. If you would like further information or advice, please contact David Alexander on 01543 267195 or email