When James Sherman* bought his Sunderland home in the early 1990s, he had no idea he would be trapped there 30 years later. “Not a day goes by that I don’t regret buying this property,” said Mr Sherman.
The 56-year-old is one of almost half a million homeowners in England and Wales who have leases of under 75 years. Most of these people are shunned by lenders and unable to sell without losing huge sums.
It is rare for banks to lend on homes with these short leases, and those that do charge higher rates with stricter terms. Anyone wishing to sell their property will be forced to do so at a heavily discounted price, while the property continues to lose value as the lease ticks down.
Flat owners also have the option to renew a lease or club together with neighbours to buy the freehold, known as enfranchisement, making it much more attractive to buyers and lenders. But this often costs tens of thousands of pounds and becomes more expensive with each passing year.
Mr Sherman bought his two-bedroom flat for £33,000 in 1992 and it is now valued at around £85,000. To renew his lease to 99 years he would need to pay £20,000 to the freeholder – a price which grows by roughly £1,000 each year.
A quirk of the system means that his neighbours in the same estate who own houses were able to extend their lease for a fraction of the cost, between £2,000 and £3,000, but flat owners on the street face bills of tens of thousands of pounds.
Mr Sherman said: “The other flat owners and I all thought we could buy the freehold when we bought our properties, but the costs are extortionate. My life is on hold and it is only getting worse with the rising costs each year.
“My options are to rent, renew the lease or sell the flat at a considerable loss. To say I am devastated does not describe how I feel.”
There are 450,000 flat owners in the same predicament, according to analysis by Lifetime Mortgage Gateway, which provides lease extensions for equity release.
The Government has promised to reform the country’s leasehold system, including greater rights for homeowners to extend shorter leases by 990 years. It also pledged to abolish “marriage value” clauses, which can significantly add to the cost of extending a lease. The value of a property can rise significantly after a lease extension and marriage clauses can force the leaseholder to pay the equivalent of half of this increase as part of their extension fee.
But these plans to reform what it described as a “feudal” system have been quietly watered down. Details on lease extension rights were missing from this year’s Queen’s Speech, which instead focused on limiting ground rent paid by leaseholders.
Mr Sherman added: “I have always voted Conservative, but their lack of action means they have lost my vote. It is criminal how we are being treated and ignored.”
Harry Scoffin, of Leasehold Knowledge Partnership, a campaign group, warned short leases were “acting as a drag on the housing market” and widening the price gap between flats and houses.
He said: “Mortgage lenders used to be fairly relaxed about short leases, lending on those in excess of 60 years, until two decades ago when they changed it for those up to 80 years.
“Lenders’ position on short leases is hardening every year and leaseholders trapped with short leases were devastated that the promised reforms to enfranchisement were axed from the Queen’s Speech this year.”
In a speech earlier this month Boris Johnson promised to "supercharge leaseholders’ ability to buy their freehold" and end unfair leasehold terms.
*Name has been changed