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SAM DUNN: Leasehold is a lucrative way to stop people owning their home outright – it’s time for a crackdown

I did what many people do when they first hear about the concept of leasehold: I scratched my head in disbelief.

It was the late Nineties and an old university pal was buying his first flat – a down-at-heel box in South London – for about £85,000.

He’d qualified for a mortgage, but his lender had phoned him to ask about extending his lease.

Building for the future? Leaseholds are a lucrative way to stop people from buying their own home outright Building for the future? Leaseholds are a lucrative way to stop people from buying their own home outright

Building for the future? Leaseholds are a lucrative way to stop people from buying their own home outright

The building society in question wasn’t happy at having just 75 years or so left on it — and wanted him to cough up an extra £4,000 or so.

Worse, the landlord was being difficult and hardly ever bothered to pick up the phone. My friend wondered if I knew anyone who could help smooth things out.

I asked him what on earth he was talking about. As far as I knew, buying a home was a simple contract: you paid your money and got your goods.


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I grew up in an old house in Gloucestershire and had absolutely no recollection of my parents ever being asked to pay money to a landlord. What kind of deal was he getting into, I asked — was it legit?

Only after he explained how it was the most common way to buy a flat, and that it was impossible to buy the freehold, did I get an inkling of the sheer complexity involved in leaseholds.

And my second reaction to the head-scratching is one I still hold: what a lucrative way to stop people from buying their own home outright.

Its history stretches all the way back to the Middle Ages when the first leasehold estates made an appearance.

Powerful feudal families caught on to the idea of keeping hold of their hard fought for land (literally) while trying to generate cash from it.

Enter leasing. It allowed families far, far down in the nation’s social classes to work and make a living on the land for set periods.

Meanwhile, they paid for this ‘right’ to do so – the lease – by giving food and certain services to the owners.

That this concept has endured through the centuries is testament to the power and wealth of landowners.

Today, the appeal of home ownership lies in its name. Buy a property and the freehold grants you the right to do whatever you like (within reason, of course).

Sure, you’ll have to deal with maintenance, repairs, difficult neighbours and all the other headaches of ownership – but it’s yours. By comparison, leasehold property sells buyers short at every step.

You could even argue that it doesn’t make you a homeowner at all. Paying a ground rent to a landlord effectively makes you a tenant.

If you live in a flat, you can be asked to pay for maintenance costs – and see annual rents rise by more than the rate of inflation.

Thanks to the Leasehold and Common Reform Act 2002, more buyers can at least apply to buy their home from a landlord.

But as Ruth Lythe reveals on pages 36 and 49, this can be a fraught process.

It isn’t cheap, it’s not easy to work out if you’re being ripped off and dealing with absent landlords and unhelpful managing agents can be extremely stressful.

Over the past few years, campaign groups have sprung up to try to fight for better rights for leaseholders.

They include Leasehold Knowledge Partnership, the Campaign Against Retirement Leasehold Exploitation and – more radically – the Campaign for the Abolition of Residential Leasehold.

But our postbag continues to overflow with letters from leaseholders telling of terrible struggles with indifferent landlords.

Incredibly, many new homes today are still being built in this way.

In May, we revealed how thousands of houses – many of which are being targeted at first-time buyers – are being sold as leasehold by property firms.

And the numbers are rising, too.

Investment companies are driving huge demand for these types of homes as they have seen it as a way to make a profit from the annual rents the buyers are made to pay.

With so much at stake, I’d argue it’s time for a major review of leaseholds and their long-term impact on households.

There simply isn’t enough protection in place for leaseholders, despite the sterling work of the Leasehold Advisory Service.

Given the heady mix of property ownership, house prices and matters of wealth involved, perhaps the Government would like to take up the cudgels.

You can ask for a non-contactless card 

Yesterday, the maximum spend on contactless cards jumped to £30 from £20.

Though these cards – where you tap your plastic on a reader rather than bash in a PIN – have rocketed in popularity, there are concerns that determined scammers can swipe your card’s deals simply by standing next to you in a shop queue.

Consumer group Which? recently warned that data from contactless cards could be easily stolen by determined fraudsters.

Though experts warn that the chances of it happening are very small, you don’t have to have a contactless card if you would prefer not to.

While banks and building societies do send out contactless debit cards with current accounts as standard, you can just pop into a branch or call customer services.

Explain that you’d rather stick to a card without the tap-and-go technology and they’ll send you a new older version.

Banks have told us they will co-operate, so if you do have any trouble, please let me know.

Beware the shopping credit temptations 

From one bit of plastic with a warning to another – but this time the alert is on cost.

Most people understand that store cards are to be handled very delicately.

Huge upfront discounts or ‘money off if you buy today!’ work only if you clear the debt immediately.

Otherwise, monstrous interest rates of 29.9 per cent will guarantee you’re not the one getting the great deal.

But it’s all too easy to allow your resolve to pay it off every month weaken – and let a monthly minimum repayment kick in instead. So here’s a timely reminder of why you shouldn’t.

Number crunching by analyst Moneyfacts shows that a £450 washing machine could cost you almost £1,200 if you make only the minimum repayments.

And that’s enough to put anyone in a spin…

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