Yahoo Finance New leasehold rip-off: how firms charge hundreds of pounds for ‘sales packs’
Thousands of leaseholders are being forced to pay management companies and freeholders hundreds of pounds for “sales packs”, despite recent moves by the government to introduce greater protections.
The packs are required by housebuyers' conveyancers, and because they can only be produced by freeholders, the seller is forced to pay whatever price is demanded - or risk the sale falling through.
Last month Sajid Javid, the communities secretary, confirmed a sweeping set of measures to tackle “feudal practises” in the leasehold property sector.
These include banning the sale of new-build houses on leasehold terms and eliminating entirely ground rents on houses and flats.
Homeowners hope the changes will also wipe out expensive “sales packs” sold by freeholders and property management companies. The packs contain basic information, such as whether the leaseholders has any outstanding debts.
They have the sellers over a barrel as leaseholders who protest can, and do, lose their buyers
Freeholders and managing agents can set their own prices and if leaseholders refuse to pay, transactions can collapse.
Dozens of Telegraph Money readers have written in to share their experiences.
Ceri Allen, 31, had to pay Mainstay Residential, a managing agent, when she sold her house on a Taylor Wimpey estate in Cheshire. A spokesman for Mainstay confirmed it charges £275 plus VAT for a "standard information pack" for sale or transfers.
David Smith, 63, was asked to hand over £460 when selling his rental property in Eccles, Manchester. This included £280 for a sales pack from agent Zenith and £180 from the freeholder, the Ground Rents Income Fund.
A spokesman for Zenith said it did not comment on individual cases. It added: "All charges made to our customers for additional services are in keeping with industry norms and are regularly reviewed. We have consistently found our charges to be lower than our competitors for providing similar services."
The Ground Rents Income Fund said tenants are not compelled to buy the packs.
Mr Smith said: “I paid £500 a year in ground rent for no service whatsoever – they could at least send any sales pack as part of that service charge.
“It’s simply a way of monetising leases to become an investment vehicle to sell on for developers, and investment companies to fleece leaseholders for years to come. There is no control over how much they can charge for the pack, but if you don't pay it and hand it over, your sale won’t go through.”
Mr Smith, an experienced landlord, said he would only purchase freehold properties in the future.
Large “institutional” investors, such as the stock market-listed Ground Rent fund, have been buying up freeholds to capture the attractive inflation-proofed income that ground rents provide.
Its share price has plunged since the start of 2017 when it seemed certain the Government would be forced to act on the ground rents scandal.
Sebastian O’Kelly, founder of the Leasehold Knowledge Partnership, a charity, said the fees are not written into leases but “dreamed up by monetisers in the leasehold sector”.
He said: “They have the sellers over a barrel as leaseholders who protest can, and do, lose their buyers.
“A vindictive freeholder, whose financial stake in a building can amount to as little as 3pc of the value of all the leases, can make a property virtually unsellable through being obstructive at this stage. It is a further example of the unbalanced nature of leasehold.”
sam.brodbeck@telegraph.co.uk
