SRA identifies failings in leasehold transactions

The Solicitors Regulation Authority has found that nearly one in four (23 per cent) of conveyancers handling leasehold transactions didn’t explain the difference between freehold and leasehold to homebuyers.

According to a report by the SRA, one in five people who had bought a leasehold property did not remember being provided with any information on the length of the lease, service charges and other payments, such as ground rent. More than a quarter (26 per cent) didn’t recall being given a draft copy of their leasehold contract to review prior to signing it.

The SRA also found that one in three first-time buyers didn’t think their solicitor had clearly explained the features of their leasehold arrangement.

Leasehold Solutions managing director Louie Burns says: “This report highlights scandalous mis-selling of leasehold properties on an epic scale. Inadequate legal advice has left thousands of leaseholders subject to escalating charges and onerous ground rents which, in the long-term, may make extending their lease unaffordable or their property unsellable.

“Ultimately it is the responsibility of conveyancing solicitors to ensure prospective purchasers of leasehold properties are aware of the ownership structure, the lease terms and their long-term effect.

“Freeholders constantly use the argument of caveat emptor (‘buyer beware’) and accuse leaseholders of failing to properly understand the implications of owning a leasehold property. If conveyancing solicitors are negligent in their duty to provide accurate and comprehensive legal advice to their clients, then how on earth are leaseholders supposed to make an informed decision?”

Burns points to a report by NAEA Propertymark which found 65 per cent of leasehold house buyers used the solicitor their house builder recommended. He claims to have seen “numerous cases” where the leaseholder was forced to use a developer-recommended solicitor, who then failed to highlight onerous terms in the lease, such as doubling ground rents and unfair service charges.

Burns says: “It looks very much like developers, freeholders and their solicitors are colluding to take advantage of leaseholders which is utterly unacceptable. Conveyancing solicitors who are found to have given inadequate or misleading advice should be held accountable and leaseholders must be given adequate compensation.”

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