Leasehold property ownership has come under yet more fire today after a new report laid bare the scale of mis-selling in the leasehold sector.
The report by the Solicitors Regulation Authority (SRA) found that a high proportion of conveyancing solicitors are failing to properly explain the implications of leasehold ownership.
The SRA report also revealed that almost a quarter - 23% - of firms did not explain the difference between freehold and leasehold properties, with some relying on the client's knowledge or information provided by an estate agent.
It also transpired that around 20% of people who had acquired 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.
Somewhat worryingly, just over a quarter - 26% - did not recall being given a draft copy of their leasehold contract to review prior to signing it, while 17% did not think that their solicitor had clearly explained the features of their leasehold arrangement – rising to one in three among first-time buyers.
What’s more, legal process failures by firms included failing to advise on issues relating to leasehold properties and common pitfalls, such as shared ownership, increasing ground rent.
Louie Burns, managing director of The Leasehold Group of Companies, said: “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?”
A recent report by NAEA Propertymark found that 65% of leasehold house buyers used the solicitor their house builder recommended.
The Housing, Communities and Local Government Select Committee report on Leasehold Reform, published in March, found that affected leaseholders may have a strong claim that their properties were mis-sold.
Burns is among those supporting the Select Committee’s call for the Competition and Markets Authority to investigate mis-selling in the leasehold sector and make recommendations for appropriate compensation.
“Conveyancing solicitors who are found to have given inadequate or misleading advice should be held accountable and leaseholders must be given adequate compensation,” she added.