Tuesday, 1 November 2016

The New-Builds Catching House Buyers In A Leasehold Property Trap

Thousands homebuyers have been trapped by a controversial trend among developers to sell homes as leasehold when they previously would have been freehold. The buyers are given 999-year leases but later find that buying the freehold is prohibitively expensive.  The trap for unsuspecting buyers comes from the escalation in ground rent in the small print of long leases. Initially, it looks affordable. The developer gives the buyer a 999-year lease, with the ground rent set at, say, £295 a year. The contract says the ground rent will double every 10 years. To the company that buys the freehold, the income is valuable. By the time a 28-year-old buyer with a 30-year mortgage comes to the end of their loan term, they will have to pay £2,360 a year in ground rent. And if they don’t pay their home can be seized with no compensation. Read more on the Guardian website.

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