The leases giving rise to the concerns relate to properties built since 2007 with high ground rents which can double every 10 or 25 years, or are linked to the rate of inflation. Such expensive ground rent clauses can be crippling for house buyers. We see many homeowners who haven’t been properly advised by their solicitors as to the impact of the ground rent. It’s not until they come to sell on their property, and it’s flagged up by the new buyer’s solicitors, that alarm bells ring.
Given the long term financial consequences which these clauses attract, it’s easy to see why a property developer may steer you towards using their “pet solicitors” to make your purchase.
My firm has acted on behalf of clients against their former conveyancing solicitors for failing to properly advise about the onerous ground rent review clauses. A more recent concern has focused on the fact that budding developers have insisted, or at the very least, encouraged, prospective purchasers to use a “pet solicitor” to handle the purchase. One incentive is often the legal costs will be cheaper, sometimes even paid for by the developer, but the concern is whether, and if so to what extent, the “pet solicitor” is truly independent.
Clients have complained that they did not appreciate they were buying, for instance, a leasehold house or that the cost of purchasing the freehold at a later date could be so much. Instructing a solicitor independent of the property developer means there is no relationship between the solicitor and developer, removing what might otherwise be considered to be a conflict of interest which might be seen to cast a cloud over the “pet solicitors” independence. Amongst the suggestions to be considered in the consultation are:-
• Regulation of managing agents to prevent the abuse of service charges
• A right of first refusal to ensure developers or landlords offer the freehold for sale to their leaseholders before selling to a third party
• A statutory right for freeholders or leaseholders on an estate where an estate service charge is payable to take over the management of the estate, similar to the statutory right to manage which is only available to leaseholders of flats.
If you have purchased a property since 2007 with an onerous ground rent review clause and you feel you were not properly advised as to the long term consequences, I will be happy to review the matter and advise, please contact me at email@example.com
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