Professional negligence claims expected as homeowners become embroiled in ground rent scandal affecting new-build properties

Posted: 05/07/2017

Specialist lawyers at Penningtons Manches are considering group actions for claimants affected by the growing scandal involving many unassuming purchasers of leasehold interests - particularly in new-build residential properties - due to the existence of onerous ground rent clauses.

The leases in question typically permit soaring ground rents, often doubling every 10 years. Many property owners are now facing the prospect of unexpected and substantial increases which are decreasing the leasehold values of their homes as well as severely restricting onward saleability.

In some cases a ground rent of just £250 per annum will have risen to £2,000 after 30 years, far outstripping inflation. In other cases, developers have included clauses in their leases stating that the ground rent will increase at a percentage of the rentable value of the property. Similarly, recent buyers trying to purchase the freehold of their properties have been quoted astronomical figures, even for leases with several hundred years remaining.

While there is growing parliamentary interest in making legislative changes for greater safeguards, the problem is ongoing. Until appropriate measures are enacted, purchasers are reliant on solicitors highlighting onerous lease clauses to their clients and, where appropriate, advising against the purchase of a property unless the freeholder agrees to amend the ground rent terms.

One well-known developer, Taylor Wimpey, has already apologised for the increases and announced a £130 million redress scheme for those affected by the issue. In a recent statement, it declared that the lease clauses were ‘not consistent with our high standards of customer service and we are sorry for the unintended financial consequence and concern that they are causing’.

“This is a serious and escalating problem,” says David Niven, partner in Penningtons Manches’ group action team. “Where it is possible to obtain reparation from freeholders, our lawyers are able to assist homeowners in presenting claims. In cases where that redress is not available, we are considering group actions against the solicitors who acted for the purchasers on the basis that they failed to alert them to the onerous clauses.”

If you have been affected by this issue, or are worried that you might subsequently be affected, please contact David Niven at Penningtons Manches’ London office on a no obligation basis. 

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