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Leasehold trapped

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A leasehold is when you own the right to live in a building but don't own the bricks or the ground it sits on. More than six million properties in England and Wales are leasehold, according to research. And just under 40% of new-build homes sold in the last two years have been leasehold.

The main difference between a leasehold property and a freehold property is that you have to pay a management and all service charges annually relating to leasehold properties. And these fees are increasing from something years ago that used to be a few hundred pounds to now could be many thousands.

This is affecting first time buyers and home movers who are being put off with the additional charge for only this type of property on top of the mortgage and council tax payments and household bills. In some cases this is affecting the saleability of these properties with prices reducing compared to the rest the market. The problem got so bad for many first-time buyers, the National Leasehold Campaign was set up.

Backed by a group of MPs, it now hopes to give people stuck in this situation a way out. The Law Commission, which recommends changes in the law to government, is asking people if they'd like to move to the Scottish system of commonhold.

Commonhold is when you communally own a building and have more say on how money is spent. The Home Builders Federation, which represents developers, disagrees with the proposals and thinks leasehold still has a place. David O'Leary from the group told us: "By and large, leases are fair and reasonable and have ground rents that don't affect a property's value." He admits there are instances where leases have been created that are unfair, but believes they can be changed. "Most responsible developers are going back and try to work with the freeholder and leaseholder to fix the problem."

It is important that buyers understand what the risk and downsides are if they don't comply with the lease. If you have a dispute in so far as the freeholder is concerned, first all you need to take some legal advice. Secondly you need to consider some form of direct engagement with them. There are alternatives to litigation - such as mediation. There are the land tribunals who can determine disputes which exist between the parties. In the event neither party is satisfied with the result you can go through the appeal process.

Posted by MMB Finance Swindon and Gloucester on 8 March 2019