Leasehold mis-selling

[staffordian]

Am I the only one to be totally exasperated and puzzled by what is touted as the latest mis-selling scandal?

I accept that the housebuilders have been totally cynical in introducing this money making racket, but come on, are house buyers totally thick, and what about the solicitors acting for them?

I cannot believe that any such solicitor would not have pointed out the pitfalls of leasehold, especially ones with escalating charges, if only to ensure there is no come back on them, apart from it being part of their basic duty, but clearly there are folk out there too wrapped up in their own little worlds to understand basic concepts such as affordability and the effect of this on subsequent resale values. Otherwise, the housebuilders would soon have discovered that no-one was buying these homes and thenpractice wohld have died a death.

I don't think some people will be happy until every last risk in the world is eliminated. What next? Rubber pavements to prevent fall injuries?

[scrumpyjack]

Am I the only one to be totally exasperated and puzzled by what is touted as the latest mis-selling scandal?

I accept that the housebuilders have been totally cynical in introducing this money making racket, but come on, are house buyers totally thick, and what about the solicitors acting for them?

I cannot believe that any such solicitor would not have pointed out the pitfalls of leasehold, especially ones with escalating charges, if only to ensure there is no come back on them, apart from it being part of their basic duty, but clearly there are folk out there too wrapped up in their own little worlds to understand basic concepts such as affordability and the effect of this on subsequent resale values. Otherwise, the housebuilders would soon have discovered that no-one was buying these homes and thenpractice wohld have died a death.

I don't think some people will be happy until every last risk in the world is eliminated. What next? Rubber pavements to prevent fall injuries?

I do share your sentiments but I suspect most buyers were pushed towards the builder's 'recommended' or even free solicitor so did not get impartial advice. I agree there should be a limit on protecting people from their own stupidity, but equally it was very ill judged of the big builders to engage in this practice. This probably started when the big builders were in severe danger of going bust after the financial crash and management looked at any way to increase revenue. Shades of bank's stupidity on PPI!

[Mike4]

I don't actually see any mis-selling myself. The terms of the leases on these houses are there in black and white for the buyers to read and nothing was concealed.

Or was it?

Is that the charge? That in all these cases the builders recommended a solicitor who concealed the terms? What duty does a solicitor have to point out unusual and onerous terms to their client? Any at all? If the client says they didn't understand and just signed the forms anyway, to what extent does a solicitor's duty, errr... extend?

[scrumpyjack]

I don't actually see any mis-selling myself. The terms of the leases on these houses are there in black and white for the buyers to read and nothing was concealed.

Or was it?

Is that the charge? That in all these cases the builders recommended a solicitor who concealed the terms? What duty does a solicitor have to point out unusual and onerous terms to their client? Any at all? If the client says they didn't understand and just signed the forms anyway, to what extent does a solicitor's duty, errr... extend?

IANAL but there is probably a duty on the seller to highlight the key contract terms, not just to have them buried in the small print.
I have no idea whether the builders did highlight the key terms of the leases when they sold them.

[Itsallaguess]

The Telegraph are running a story about this -

The competition watchdog has accused four of the UK's major housebuilders of misleading leasehold buyers and of potential mis-selling in the housing market.

The Competition and Markets Authority has written to Barratt Developments, Countryside Properties, Persimmon and Taylor Wimpey after finding "troubling evidence of potentially unfair terms".

The regulator warned that some leasehold buyers were being hit with ground rents that doubled every decade, while others were wrongly told that they were unable to buy the freehold on a site. It added that developers had not clearly explained what ground rent was to some buyers and whether it increased over time.

Andrea Coscelli, the CMA's chief executive, said: "It is unacceptable for housing developers to mislead or take advantage of homebuyers. That's why we've launched today's enforcement action. "Everyone involved in selling leasehold homes should take note: if our investigation demonstrates that there has been mis-selling or unfair contract terms, these will not be tolerated."

The CMA is also probing the potential use of unfair sales tactics, including unnecessarily short deadlines to complete purchases.

https://www.telegraph.co.uk/business/2020/09/04/major-housebuilders-accused-misleading-leasehold-buyers/

Cheers,

Itsallaguess

[Mike4]

IANAL but there is probably a duty on the seller to highlight the key contract terms, not just to have them buried in the small print.
I have no idea whether the builders did highlight the key terms of the leases when they sold them.

I guess this is what I'm asking. IS there a duty to highlight key terms?

I can imagine there might be but where does this duty originate?

[mike]

....That in all these cases the builders recommended a solicitor who concealed the terms? What duty does a solicitor have to point out unusual and onerous terms to their client? Any at all? If the client says they didn't understand and just signed the forms anyway, to what extent does a solicitor's duty, errr... extend?

Our friendly resident lawyer wrote quite a piece on this some time back

This is quite clearly both a gross dereliction of their duty and a clear case of negligence, and I sincerely hope the corrupt bastards get sued for every penny.

https://www.lemonfool.co.uk/viewtopic.php?p=40310&sid=1de99f39127268e48e53a1be3e373d03#p40310

[Stonge]

Whether or not these terms were buried in the contract, this behaviour by the builders is indefensible and reflects very poorly on reasonable and fair leasehold terms.

If I had my way the CEOs of these builders would go to prison for a very long time. But they'll probably go to the House of Lords (occasionally) instead.

Such is the corrupt country that we live in.

[Mike4]

....That in all these cases the builders recommended a solicitor who concealed the terms? What duty does a solicitor have to point out unusual and onerous terms to their client? Any at all? If the client says they didn't understand and just signed the forms anyway, to what extent does a solicitor's duty, errr... extend?

Our friendly resident lawyer wrote quite a piece on this some time back

This is quite clearly both a gross dereliction of their duty and a clear case of negligence, and I sincerely hope the corrupt bastards get sued for every penny.

https://www.lemonfool.co.uk/viewtopic.php?p=40310&sid=1de99f39127268e48e53a1be3e373d03#p40310

Ok thanks. The only law being breach as far as I can see is CK's rather vague assertion of negligence and dereliction of duty. If it were cut and dried then these amoral panel solicitors operating in that gap between morality and legality would be getting successfully sued right left and centre.

I hold that the root problem is houses should never be sold leasehold. The whole point of a lease is for flats, where multiple people buy the right to occupy as it is not possible for them to own the land five floors below them.

[UncleEbenezer]

Am I the only one to be totally exasperated and puzzled by what is touted as the latest mis-selling scandal?

Every 'misselling' scandal involves an element of the dumb buyer, though some more than others. Ground rents (even TW's) are insignificant compared to some abuses of service charges, but the meeja are onto it as a scandal.

I accept that the housebuilders have been totally cynical in introducing this money making racket, but come on, are house buyers totally thick, and what about the solicitors acting for them?

I wonder if solicitors are indeed warning about it, but their warning is going unheeded (and unnoticed) in a buyer's eagerness?

Given that you can buy your own freehold on a house (not a flat - much bigger problem) at a price determined by a statutory formula, it should be straightforward for any of the parties to factor that price in to what a leasehold house is worth.

[Mike4]

Given that you can buy your own freehold on a house (not a flat - much bigger problem) at a price determined by a statutory formula, it should be straightforward for any of the parties to factor that price in to what a leasehold house is worth.

Well yes but the problem supposedly is, given the lucrative terms of the GRs in these cases, the statutory formula you mention returns a price to buy the freehold approaching six figures sometimes AIUI.

But yes, very straightforward as you point out. I dunno what all the fuss is about.

[NeilW]

[
I hold that the root problem is houses should never be sold leasehold. The whole point of a lease is for flats, where multiple people buy the right to occupy as it is not possible for them to own the land five floors below them.

Even that can be addressed with flying free holds and the relevant covenants between the flats. Or Commonhold

[Clitheroekid]

I wonder if solicitors are indeed warning about it, but their warning is going unheeded (and unnoticed) in a buyer's eagerness?

As I said in my referred post (was it really 3 years ago?) most of the solicitors involved were in reality more concerned about keeping well in with the builder, so they would be fed lots more of tame clients. Their usual technique was to bury the information in a lease report comprising several pages, knowing that 90+% of the clients wouldn't read / understand it.

Whilst LF's are mostly people who would read such a document the large majority of people buying these houses are young, not particularly well-educated, and they view solicitors as just a vaguely irritating and expensive part of the buying process rather than legal advisers. In these cases the solicitors had completely abandoned their role as legal advisers, and just wanted their `client' to exchange contracts as quickly as possible, so as to help the builders meet their monthly targets.

It was my practice - and I'm sure that most other genuinely independent solicitors would have done the same - to point out something like this right at the outset. Surprisingly, the builders would sometimes agree to a variation in the lease, or we would fix a price for the freehold to be bought, though this certainly wasn't the norm. And not all of my clients would accept my advice - there were some who were so fixated on buying the house that they managed to convince themselves it wasn't a problem. In such cases I would ask them to sign a specific disclaimer saying that they were proceeding against my advice, and that did persuade some of them - but not all - to change their mind.

Needless to say, I didn't get many referrals from builders!

Given that you can buy your own freehold on a house (not a flat - much bigger problem) at a price determined by a statutory formula, it should be straightforward for any of the parties to factor that price in to what a leasehold house is worth.

It's anything but straightforward. The statutory formula is extremely complex, and isn't remotely understood by 99% of solicitors, let alone unqualified conveyancers (and bear in mind that the large majority of conveyancing is carried out by people with virtually no legal knowledge). And where you're dealing with variable ground rents the valuation process is a horrendously complicated exercise.