Leasehold Scandal - Conveyancers Criticised over Leasehold Failings

Author:
Robert Godfrey
Partner, Head of Professional Negligence and Dispute Resolution
Date:
25/04/2019

Most people who buy a house are fortunate enough to deal with Conveyancing Solicitors who deliver a high-quality service, act in their best interests and give them all the information they need to know. But the leasehold scandal has thrown up alarming reports of how this isn’t always the case.

For instance, many people who have bought a leasehold property have only discovered after the event that the lease contains onerous clauses that could make it much harder for them to sell the house at the price they paid for it.

Conveyancers aren’t Explaining Freehold/Leasehold Differences

A new study by the Solicitors Regulation Authority (SRA) has lifted the lid on precisely how widespread this problem is. According to the research, Solicitors didn’t explain the difference between freehold and leasehold models of ownership in 23% of leasehold property purchases.

Instead, they relied on their clients to get this information from elsewhere. That means many buyers of leasehold homes have gone into transactions without fully understanding any potential contractual obligations.

“This is of particular concern, as leasehold property home buyers can find themselves liable for fast rising charges, such as ground rents,” the SRA commented. “In the long term, such payments may not only become unaffordable, but they may make it very difficult to sell the lease on.”

Anna Bradley, Chair of the SRA, stressed that many law firms and Conveyancing Solicitors are providing a good service for their clients and acting in their best interests. However, she said those who aren’t are letting down both their clients and “also the profession as a whole”.

If you’ve been affected like this, you may be able to make a claim against the Conveyancing Solicitors you hired.

For free legal advice call our Professional Negligence Solicitors on 08002605010 or request a callback.

Simpson Millar has been actively working to raise awareness of the leasehold property an ground rent clauses scandal and several hundred people have already contacted us for free legal advice. We're currently working with the National Leasehold Campaign to highlight the issue.

"People should be able to rely on their Solicitors to be open about what their services will cost, and to explain the potential financial and legal implications of any transaction,” Ms Bradley continued.

“When Solicitors fail to do this, for example in relation to long term leasehold charges, they may be leaving their clients open to ever increasing and potentially unaffordable financial liabilities.”

Pledge to Crack Down on Unfair Property Leases

The SRA’s findings came shortly after Communities Secretary James Brokenshire announced a new industry pledge to prevent leasehold property owners becoming trapped in “unfair and costly deals”. The government-backed pledge has been backed by more than 40 major property developers and freeholders and commits them to scrapping clauses that could result in ground rents soaring over a short period of time.

At the same time, ministers have confirmed plans to close the legal loopholes that force leasehold property owners to pay excessive fees if they take legal action against their freeholders over service charges. The government also intends to consult with the industry over whether these changes should be applied to existing leases as well.

Mr Brokenshire said, “Since becoming Communities Secretary, I have repeatedly made clear my ambition to end those exploitative and unfair leasehold arrangements that have no place in a modern housing market. The new industry pledge - signed by leading freeholders and property developers - will further support existing and future leaseholders by protecting them from onerous fees.”

Of course, a pledge by the industry is very different from actual regulation designed to squarely clamp down on this problem, so it remains to be seen how effective it will be and what difference it will make. But at the very least, it represents an acknowledgement of the leasehold property scandal in the corridors of power, and a sign that the pressure that’s being put on industry to make changes is getting noticed.

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