Over 130 homeowners on the Royal Mills development on Cotton Street, Manchester M4 could be trapped in their homes for the rest of their lives because of terms in their leasehold contracts set when the homes were built.
This situation is part of a national scandal involving thousands of homeowners, who are caught in a leasehold trap from which they cannot escape. The main issue is that their leases contain clauses allowing ground rents to escalate for the length of the lease – usually doubling every ten years.
As years pass and ground rents increase, these homes may lose value and become unsaleable. According to the Council of Mortgage Lenders, some lenders – including HSBC, Nationwide, and Santander – are declining to grant mortgages on houses with this type of clause in the lease.
As many as 100,000 houses across the UK could have been sold with leasehold contracts which include these aggressive escalation clauses. It is also likely that many homeowners have no knowledge that their leases contain contentious clauses which lock them into an unattractive leasehold. The scandal is that the majority were not made fully aware of such clauses by the lawyers handling the conveyancing when they bought their homes.
Justin, an apartment owner in the Royal Mills development said: “The Government should outlaw ground rent escalation clauses. I now know they are a crafty way of squeezing extra money out of the leaseholder at the very stressful time of buying property. My building society was happy to sell me a mortgage with such a clause, but now if I want to sell it, they will not offer a mortgage to my buyer, so I am stuck with an unsaleable property and will have to sell at below market price or pay an enormous sum to purchase the freehold before I can sell it.”
FS Legal Solicitors LLP, a firm specialising in class actions across the UK, is already acting on behalf of hundreds of affected leaseholders. Martyn Anderson, a solicitor with the firm, said, ‘Our team of lawyers have expertise in progressing complex claims and we have successfully recovered millions of pounds for clients who were victims of property-related scams. People caught up in this outrageous lease scandal could find it very costly to fight alone. As a firm, FS Legal Solicitors LLP will pursue the conveyancers and other parties behind these iniquitous leases.’
FS Legal Solicitors LLP has contacted leaseholders such as those on the Royal Mills development to examine evidence relating to the original purchases and to confirm whether the leases contain these escalating ground rent clauses. If problem clauses are found, and the buyers confirm that they were not made fully aware of them by their lawyers when they purchased their homes, FS Legal Solicitors LLP will unwaveringly pursue their cases, even through the courts to determine whether compensation may be due.
Anderson continued, ‘We are aiming for financial reparation which would enable clients to purchase the freehold to their properties. FS Legal Solicitors LLP work on a “no win no fee” basis, where we get paid by claiming our costs from the other side leaving the client with 100% of any compensation we recover. Before undertaking such action, we will fully advise our clients on the risks of taking action.’
He added, ‘Since around 2007, major home builders in England and Wales have been selling properties with long-term leases of up to 999 years. In general the sales pitch claimed that these leases were ‘virtually freehold’ however they contained clauses which enabled the ground rent to increase, using either an RPI-related formula or a rent-doubling clause. Of great concern is that the payments arising from these clauses have no upper limit or break point prior to the expiry of the lease. This means that ground rent starting at a low level, say £250 per annum, will double every ten years, building up to many thousands of pounds a year. As a result, properties may become un-mortgageable and unsaleable.’
The Manchester meeting public meeting to which all media is invited is on Thursday 21st June, 6-8pm. Abode Hotel, Manchester – for residents of postcodes M4 5BZ, M4 5BA, M4 6HS, M4 5AX.