Ninety three per cent of leaseholders surveyed by Propertymark said they would not buy a leasehold property again. That is more than dissatisfaction. It is a warning about the gap that can exist between completing a purchase and understanding what has really been bought.
The findings appear in Propertymark’s report, Leasehold: still a life sentence?, which drew on responses from more than 1,200 leaseholders and over 200 property professionals. The report was also covered by Today’s Conveyancer.
The figures are difficult to ignore. Eighty six per cent of leaseholders surveyed had seen their service charge increase during the previous 24 months. Eighty nine per cent felt it was difficult to challenge unfair service charges. More than 78 per cent of agents had removed at least one leasehold property from the market because it could not be sold.
Leasehold reform matters, but there is also an immediate conveyancing question. How can a buyer reach exchange believing the property is suitable, only to feel trapped by the same lease later?
Leasehold regret is not proof that the advice was wrong
A later problem does not automatically mean that a conveyancer failed. Service charges can rise because of expenditure that nobody could reasonably have predicted. Legislation, lender requirements and market attitudes can change. A building may need urgent work years after the purchase.
The relevant question is more precise. What was known, or reasonably capable of being discovered, before exchange and what did the buyer understand about it?
A conveyancer cannot guarantee the future. The task is to investigate the present documents and information, identify material risks and explain their practical effect. That explanation must help the client make a decision, not merely prove that the lease was read.
A technically complete report can still leave the buyer uninformed
A leasehold report on title may accurately reproduce the term, the current ground rent, the service charge machinery and the restrictions in the lease. Yet accuracy alone does not ensure understanding.
The buyer usually needs the consequences translated into ordinary questions:
- What may I have to pay, now and later?
- Could major works result in a substantial additional bill?
- Is there enough money in the reserve fund?
- Could the ground rent clause concern a future buyer or mortgage lender?
- How long will the lease have left when I want to sell?
- Will I need consent to let, alter or use the flat as intended?
- Is the property likely to remain readily saleable and mortgageable?
The SRA has previously drawn attention to this distinction. Our earlier article, SRA Shine a Light on Inadequate Leasehold Reports on Title, considered concerns about information that was lengthy or technically correct but failed to explain the implications clearly. The lesson remains current. A client needs advice that supports a real decision before becoming legally committed.
Service charges are not just this year’s figure
Propertymark reports that 74 per cent of agents identified onerous service charges as the main difficulty when selling leasehold flats. The current annual charge is important, but it is only the beginning of the enquiry.
The accounts, current budget, reserve fund and planned expenditure need to be considered together. A modest charge can conceal deferred maintenance or an empty reserve fund. A higher charge may fund extensive services and proper long term maintenance. The number means little without context.
Buyers should also understand that an estimated charge may later produce a balancing demand. Proposed works, consultation notices and known defects may be more significant than the current annual amount. Where the information is missing or unclear, that uncertainty is itself material.
The law has long provided controls concerning leasehold costs. Our unindexed archive article on the Landlord and Tenant Act 1987 and unfair service charges is a reminder that the reasonableness and recoverability of charges are not new concerns. Statutory rights may provide a route to information or challenge, but they do not make a bill affordable and they do not remove the disruption of a dispute.
An owner now facing a major works bill or a sale that has stalled may find the Would I Buy page on service charges and major works useful. It explains both the present problem and the records from the original purchase that may help establish what was known at the time.
Ground rent can affect more than the annual cost
A ground rent clause may appear inexpensive when the flat is bought. Its review formula can be far more important than the starting figure.
The report should identify the current rent, the frequency and basis of review, and the possible effect later in the term. It should also explain that lender and valuation attitudes can affect a future sale or remortgage. The fact that one lender accepted the property at the time of purchase does not establish that the wider market will always do so.
This is where illustration can be more effective than transcription. If the lease permits the rent to increase in a way that can be calculated, showing the buyer what the figure may become makes the clause tangible. If the result depends on an index, the mechanism and the uncertainty still need to be explained.
Owners who discover the issue only when selling or refinancing can review the Would I Buy page on onerous ground rent. It addresses the questions raised by the original lease, historic lender requirements and the advice given when the property was purchased.
A short lease is a moving problem
The remaining term reduces every day. A lease that was acceptable to the buyer and lender on completion can be less attractive by the time the owner wants to sell. The client therefore needs more than the number of years remaining on the purchase date.
The advice should place that term in the context of the buyer’s likely period of ownership, possible extension costs and the effect on future lending and marketability. It should also make clear that lender criteria differ and can change.
Our unindexed 2015 article, Leasehold: 85 is the New 70, recorded how lenders were already changing their minimum lease term requirements. Its continuing value lies in showing that mortgageability is not a fixed concept. Advice based only on whether the buyer’s present lender will proceed can miss the wider resale risk.
The Would I Buy page on short leases is relevant where that risk has now materialised and the owner is asking whether it should have been explained at the time of purchase.
Information must be obtained early enough to matter
Leasehold advice depends heavily on information from the landlord, managing agent or management company. Accounts, budgets, insurance documents, planned works, disputes, arrears and fire or building safety information may arrive late.
That creates pressure, but exchange should not turn an information gap into the buyer’s problem without a clear discussion. If documents are outstanding, the report should say what is missing, why it matters and what risk the client would accept by proceeding.
The CQS Purchase of a Leasehold Policy, another page identified in the unindexed export, highlights matters such as service charges, reserve funds, major works, ground rent, lease length, management information, marketability and mortgageability. These are connected issues. They should not be divided into isolated paragraphs that leave the buyer to assemble the overall risk.
The report should answer the buyer’s real question
The buyer is not asking only whether the legal title can be registered. The real question is whether this is a property they should buy at the agreed price, with the intended mortgage and for the way they plan to use it.
A useful leasehold report should therefore:
- separate urgent decisions from general information;
- draw together connected risks from the lease, management pack and lender instructions;
- explain costs and review mechanisms in plain language;
- identify missing evidence and the consequence of proceeding without it;
- address future sale and remortgage risk, not only the current transaction;
- record any issue the client has chosen to accept; and
- give the client enough time to ask questions before exchange.
This is not about predicting every future expense. It is about ensuring that a foreseeable risk does not remain hidden inside a long attachment or a clause copied from the lease.
What the Propertymark findings should change
The scale of reported regret should concern everyone involved in leasehold transactions. It points to problems with the tenure, but it also shows why clear advice and informed consent matter.
Not every dissatisfied owner was badly advised. Not every later bill could have been anticipated. Equally, completion of the purchase and registration of the title do not prove that the buyer understood the financial and resale consequences.
The strongest protection for the buyer, and for the conveyancer, is a report that does more than describe the documents. It should expose the decisions hidden within them.
If a buyer knows the service charge history, the prospect of major works, the ground rent mechanism, the declining lease term and the possible effect on future mortgageability, they may still proceed. They may renegotiate. They may seek further advice. They may walk away.
That is not a failed transaction. It is conveyancing doing its job before regret becomes the only remaining choice.