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28th July 2017

Beware of hidden charges on new-build homes

Buyers of new-build houses should consider acquiring the freehold of their homes to avoid potentially crippling charges.

Gemma Featonby

The advice from Thrings property litigation partner Gemma Featonby comes as the Government announces plans to crack down on unfair fees levied on the owners of some new homes.

Under the proposals, leaseholds on new-build houses would be outlawed while ground rents could be reduced substantially.

The aim is to prevent investment companies or landlords from taking advantage of “rip off” rises in ground rents which can increase dramatically over the term of the lease.

This can prove financially devastating for leaseholders – who hold a long lease of their home as opposed to the freehold – and can make their property extremely difficult to sell.

Historically the leasehold system has applied to blocks of flats with communal facilities and services, whereas houses are usually sold as freehold properties where the buyer owns their property outright.

But greater numbers of new-build homes are being sold as leasehold and buyers are unaware of the potential ground rent pitfalls.

“Many house buyers believe that a long lease is as good as owning the property outright, but this is not always the case,” said Gemma. “Your landlord holds a superior interest in the property and ground rent is payable unless you own the freehold.

“If you have a long leasehold of a house it’s therefore worth seeking advice on how much it would cost to acquire the freehold to avoid ground rent charges altogether.

“You have a statutory right to acquire the freehold of your home as long as you satisfy the qualifying criteria.”

The Government proposals are subject to an eight-week public consultation process and apply only to England.

For further information about the qualifying criteria please click here. Alternatively please visit the Leasehold Enfranchisement section on Thrings’ website.

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