Home buyers should be given proper guidance when buying and selling a leasehold home as well as offered greater regulatory protection from unscrupulous behaviour often in the form of management company fees and their administrative costs, a South Wales conveyancing firm has warned.
Management fees are part and parcel of buying a leasehold property and in principle they can make life easier – home owners pay into a fund that is used to cover costs from fixing a broken lift to ensuring that the bins are collected on time.
But in recent years, management fees have risen rapidly with Direct Line recently claiming that 33 per cent of management companies have increased their fees in the past two years – the average service charge is now around £2,800.
The worst case scenario is when service charges are uncapped and rise rapidly with there being little clarity on how the money is being spent. In addition, disproportionate administration charges are frequently made at the point of sale and can come as a shock to sellers who have not factored these costs into their moving finances.
And although leaseholders can legally challenge management companies, the law in this area is complex. Leaseholders could be facing top lawyers employed by the management companies who know loopholes in the law.
Losing a case could incur thousands of pounds in court fees for the leaseholder. In fact, the Property Knowledge Partnership, which lobbies for better protection for leaseholders, estimates 50 people a year lose their homes this way.
Increasing awareness of the issue and that of unfair behaviour around ground rents and administrative charges has led to the government making regulations around leasehold properties a priority for 2017. There is a particular urgency as more properties are being sold as freehold – the number of new build houses going on the market as leaseholds jumped from 3,420 in 2010 to 9,000 in 2015.
Laura Liddell, the Managing Director of Dezrezlegal, a property law specialist firm based in Swansea, has welcomed potential reforms and warned first time buyers in particular to get good advice from a trusted source with their best interests at heart.
“When your goal is to set foot into your new dream home, the conveyancing process can seem like a daunting hurdle. But we encourage clients to see us as a helpful partner ready to assist them in achieving their end goal. Having accurate information about your potential purchase, particularly if you are to sign a leasehold agreement, is an absolute necessity and safe guards your interests well into your future. You need to know about matters such as management fees and related administrative charges as soon as possible.
“We welcome potential reforms in this area as there have clearly been examples of new homeowners being misled and signing up to agreements that have not been explained to them fully.
“Buying a home can be a confusing time. While reforms will help, we also believe it is critical that you need to be able to trust your chosen conveyancer – trust that they are advising you appropriately about these issues in a timely manner and that they know what they are doing,” Liddell said.
“When anybody uses Dezrezlegal for their property selling or buying needs we ensure that they’re assigned one named qualified person so that they can easily ask questions and get updates throughout the process. And as an established team of property experts it’s our job to spot issues before they become a big problem.”