A group of new-build home owners is planning legal action against developers and solicitors for the mis-selling of leasehold properties.
Housing developers accused of mis-selling new properties are braced for legal action after locking buyers into leases with spiraling ground rent charges.
The Communities Secretary, Sajid Javid, this week announced plans to prevent homebuilders from selling new houses on a leasehold basis. He also wants to reduce ground rents on new flats to that of a ‘peppercorn’ rent. His action has added support to campaigners seeking redress from builders.
One company facing the prospect of a civil court class action is Taylor Wimpy. Thousands of people who bought leasehold properties from Taylor Wimpy cannot re-mortgage or sell their homes because they have been lumbered with leases with onerous financial clauses.
Campaigners say developers are making 100s of millions a year from selling houses with leases that charge annual ground rents of up to £10,000 — and which double every decade. The freehold is then sold to a third party for further profit. The cost of buying the freehold then rises beyond the means of the average home owner. The leaves many homeowners in an unenviable position, they cannot sell the property, nor buy the freehold to make the property saleable and they are left with spiraling costs.
Law firms who failed to point out the pitfalls of buying these types of leasehold are also braced for a wave of professional negligence claims. The Solicitors Regulation Authority (SRA) has called for those affected to register a complaint. Solicitors found guilty of wrongdoing could be struck off.
Campaigners are now asking Mr Javid to help those already saddled with costly leases. His planned ban on leases on new houses could be introduced by autumn, after the eight weeks consultation period.
It is believed Taylor Wimpey has set aside £130 million to rewrite all leases with escalating ground rent.
A spokeswoman for the company said: “All our customers received independent legal advice when signing their leases, the terms of which were outlined clearly. We would expect all solicitors to explain the ownership structure and any rent reviews. We are working with the freeholders to convert our customers’ doubling leases at our expense to ones that resolve concerns around how easy it is to sell or get a mortgage on these properties. Taylor Wimpey has set aside £130 million.”
The Solicitors’ Regulation Authority said: “Where there is evidence that solicitors have fallen short of the standards we have set, we will take action.”