New twist in the great British leasehold rip-off: Homeowners charged thousands more than their neighbours to buy freeholds

  • Homeowners on a Barratt development in Derbyshire claim they paid £8,250 for their freehold at the point of purchase
  • On moving into their new homes, they discovered neighbours who had paid only £5,000 just four months later
  • Developer Barratt says it has done nothing wrong as the price of the freeholds are determined by the 'market value' 

Homeowners who bought new-build houses on a Barrett development have spoken out after discovering they paid thousands of pounds more for their freeholds compared to their neighbours who bought them just months later.

They paid the extra amount because they bought the freeholds at the same time as they bought the homes - which were marketed for sale as leasehold properties.

Had they waited just a few months later until after they had moved into their new properties, they could have secured a discount of up to 40 per cent on the purchase of the freehold - which means they own the house as well as the land it sits on.

Homeowners claim they could have secured a 40% discount on the purchase of their freeholds by waiting until they had moved into this Barratt development in Derbyshire

Homeowners claim they could have secured a 40% discount on the purchase of their freeholds by waiting until they had moved into this Barratt development in Derbyshire

The developer Barratt claims the differences in price represents nothing more than the 'market value' for the freehold. It said the market value is determined by 'institutional investors' and the price of the annual ground rent.

However, the homeowners who bought properties at the site in Derbyshire are struggling to see how the values changed so drastically in just four months.

Those who paid extra for their freehold at the point of sale claim they paid 'grossly inflated prices'. They claim that the developer took advantage of their eagerness to own a freehold property.

Leasehold houses hit the headlines earlier this year when it was revealed the charges they incur in the form of grounds rents can double every 10 years. By buying the freehold, homeowners can avoid these increases.

Stuart Scott was one of the homeowners who decided to buy the freehold when he bought a house on Octavia Gardens in Derbyshire at the end of November 2016.

'Having previously owned a leasehold property, I only wanted to go ahead with the purchase of my new house if I could own the freehold, ' he explained.

Octavia Gardens homeowner Stuart Scott described the price he paid for the freehold at the point of purchase as 'grossly inflated'

Octavia Gardens homeowner Stuart Scott described the price he paid for the freehold at the point of purchase as 'grossly inflated'

'I was told I needed to pay £8,250. And so I paid this extra amount when I bought the house.

'But I soon discovered, once I had moved onto the development and started talking to my neighbours, that some people had paid significantly less by waiting until they had settled into their new homes.

'It is as if Barratt suddenly wanted to get rid of the leaseholds that it had been left with.'

His neighbour - who preferred not to give her full name - bought her property at a similar time at the end of last year. She declined to buy the freehold at the point of sale, which was offered to her for around £8,000.

After moving in, she was told by Barratt the following March that she could buy the freehold for the lower price of £5,000. She has now purchased the freehold at the lower price.

The Government has announced plans to ban the leases on new houses and restrict ground rents to as low as zero

The Government has announced plans to ban the leases on new houses and restrict ground rents to as low as zero

The Government said in the housing white paper published earlier this year that it wants to ban leases on new houses. Leasehold on flats is far more common and is likely to remain so.

The Communities Secretary Sajid Javid followed this by outlining his plans last week, which also included restricting ground rents to as low as zero.

He said: 'It's clear that far too many new houses are being built and sold as leaseholds, exploiting home buyers with unfair agreements and spiralling ground rents. Enough is enough. These practices are unjust, unnecessary and need to stop.'  

Meanwhile, developers can continue to charge different amounts for freeholds depending on whether buyers are obtaining them at the point of purchase or after they have moved in.   

A spokesperson for Barratt Manchester said: 'The price we charge is the price that the freehold reversions are valued at in the open market by institutional investors who purchase them on a large scale. We use that price when we sell freeholds to customers who want to buy their own freehold.

'The market for freehold reversions has changed quite considerably over the last year, and the prices being paid by institutional investors have changed, so customers have been able to purchase their freeholds at a lower rate which reflects the market as it is stands now.

'The price set by institutional investors is often expressed as a multiple of ground rent.'

A spokesman for the Government's Department for Communities and Local Government told MailOnline: 'This government is acting to promote fairness and transparency for leaseholders in this country with proposals to stamp out the exploitation of new buyers through unfair agreements and spiralling ground rents.

'We will also be considering further reforms to ensure transparency and fairness for leaseholders, including those extending their lease or purchasing the freehold.' 

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