Reading the small print when buying a new-build home is vital if you don’t want to be caught out with extortionate ground rent charges.
Ground rent charges kill the sales of homes all over the UK, but how did people manage to get themselves into this situation unknowingly?
Well, the simple answer to that is not reading the small print.
We are all guilty of it at some point in our lives, however when spending £100,000’s on property, neglecting to read the small print can be an incredibly costly mistake.
Now we find ourselves in a situation where many people who bought new-build homes have been left with virtually unsaleable homes because of the rapid rise in ground rent charges.
It’s a problem rife here in the north west of England where properties have been sold on a leasehold basis.
These new-style leasehold homes come with ground rent charges that, in some cases, could double every ten years.
People who purchased properties on this basis are now faced with rising costs, or are left struggling to sell a property when they want to move.
Isn’t it just a communal service charge?
Quite simply, no.
A service charge in a block of apartments, or a house on a complex, will pay for the upkeep of the ‘common parts’ of the development.
This usually covers gardening and cleaning of communal areas within the complex.
Ground rent is more akin to a tax with no services offered in return.
It’s all about the money
At a time of historic low interest rates, ground rents have become a hugely popular choice among investors, providing guaranteed, lucrative income streams.
Up until around 2011, property developers Taylor Wimpey’s contracts had, in many cases, allowed for ground rent charges to double every ten years – eventually moving to a RPI basis after that.
It’s little wonder many see leasehold as nothing more than a ransom note.
Read the small print carefully
If that sounds simple, it’s because it is!
Why would you not read through every last detail when your about to part with so much money?
Remember, this isn’t a mobile phone contract or a Spotify subscription.
If you’re buying a property, it’s the one time in your life when you absolutely should read the small print – get your lawyer to explain anything you don’t understand.
It’s not fair to say people in this situation have been ‘caught out’ as such, they just haven’t taken the time to understand the full terms of the contract they are signing.
Knowing the fundamental nuts and bolts of the contract is imperative.
Related Article: 9 Things You Oughta Know When Buying A Property
Seek your own advice
Many buyers have used the solicitor recommended by the developer, which in my opinion is a huge conflict of interest.
Seek you own advice and have your lawyer explain the contract thoroughly until you’re happy you fully understand what you are signing for.
A solicitor is only at fault if they do not bring to your attention that there are ground rent charges included.
You should speak with a surveyor for valuation advice to get full disclosure on future costs.
The government has promised to ‘stamp out’ ground rent charging abuses.
We must make sure the kind of abuses mentioned are stamped
out and we will
continue to do everything [we can]. We do work with a number of stakeholders and we can certainly see how we can do more – communities secretary Sajid Javid
However, rather than waiting for the government to change legislation (not something that is achieved overnight), do your own homework and read ALL of the small print.
It’ll prevent you from being caught out by any unexpected surprises.
Contracts can be a minefield of technical jargon, if you don’t fully understand it have a lawyer explain it to you until you’re certain you know what you’re signing into.
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