• Flat owner reports being trapped in property valued at zero just six years after being built • £1,000-plus fees to freeholder for permission to build extension • £35,000 quote to buy freehold on Bovis detached house built a year ago

Following a special report in last week’s Guardian Money, there has been a huge response from readers caught out by leases with sky-rocketing ground rents.

‘We paid £101,000 for our Taylor Wimpey home in 2010 – now it’s valued at zero’

Can a newly built apartment from Taylor Wimpey effectively be worth nothing after just six years? Sean Greenwood’s wife paid £101,000 for a flat in a new development in Gornal, on the edge of Dudley, which she was told would be a great way to get on to the property ladder. But he claims that some banks and building societies are refusing to give mortgages to prospective buyers because a clause in the original leasehold agreement means owners are liable to pay ground rent to the freeholder that will spiral to £8,000 a year.

“We are now trapped with an apartment we cannot sell,” says Greenwood. “Our neighbour, hoping to move as well, told us that their intended buyer’s mortgage company had refused to lend on the property and deemed that it had a zero value. On further investigation we found out that the ground rent review clause in our lease is preventing lenders approving a mortgage.”

Ground rents are the crux of the problem. These are the annual payments leaseholders have to make to a freeholder which, in the past, were little more than a “peppercorn” rate, sometimes so low they were not even collected.

But as Guardian Money highlighted last week, developers have begun selling houses as leasehold that would traditionally have been freehold, with clauses that allow the ground rent to rise dramatically in later years. No services are given in return for the ground rent, which is distinct from management charges for looking after a building.

In the Greenwoods’ 125-year lease the £250 ground rent on the two-bed flat doubles every 10 years. In three years it will be £500 a year (on top of the current £840-a-year service charge), rising to £8,000 from 2059. Greenwood has made estimates that over the life of the lease (125 years) the freeholder will invoice the 32 apartments for a total of £21,672,000.

A letter sent to Taylor Wimpey last week by lawyers acting for another flat owner in the block says she “has now had two prospective buyers withdraw from the purchase in the last six months due to the excessive rent review clauses. The latest buyer’s mortgage valuation came in with a nil value due to the rent review clause”.

Beware the small print that could hike one-bed flat’s ground rent to £8m-a-year Read more

Like other flat owners, they want answers from Taylor Wimpey about what they are supposed to do. It sold the freehold to a private company two years after building the estate. The flat owners believe it was sold for around £138,000, and say they were not offered the option to buy. “The current freeholder stands to get their investment back 156 times over,” claims Greenwood.

A search of the main property websites reveals that flats are currently for sale in the block, and that sales have been completed in the last year, although at prices below the original purchase price six years ago.

In an open letter to MPs and the housing minister Greenwood asks: “How can a six-year-old apartment be worth nothing? And how can freeholders be allowed to fleece residents who are essentially held to ransom, not able to sell, so forced to live there forever and pay the spiralling ground rent charges?”

After last week’s story many readers asked why conveyancing solicitors appear to fail to warn buyers of the potential costs. Greenwood says his wife used a solicitor recommended by Taylor Wimpey to do her conveyancing and that while they “did make clear that she could not have a pet and had to be aware of the noise levels,” he claims that the topic of ground rent increases was not prominently raised with her. He claims that if any of the 32 buyers in the block had been made aware that they could be liable for a portion of, by his calculations, a £21m ground rent bill in the future they would have walked away immediately.

We put Greenwood’s story to Taylor Wimpey. It said: “We can’t comment on this particular situation as we do not know the details of how the valuation was arrived at. However, it should be noted that Taylor Wimpey does not own the freehold for this development.”

Facebook Twitter Pinterest The Mellors received a letter saying Bovis had sold the freehold. Photograph: Rui Vieira/PA

‘Bovis said the freehold would cost £4,000. A year later it’s £15,000-£35,000’

A year ago Martin Mellors and his wife bought a newly built detached house in Botley, on the edge of Oxford, on an estate built by Bovis Homes. The Mellors say they were told that although the house was leasehold, it was on a reassuringly long lease which could be bought for a few thousand pounds within two years. But only a year later, buyers are finding, to their horror, that the freeholds have been sold on, and that householders who want to buy them could face bills of up to £35,000.

“The estate is a mix of flats and houses. We weren’t told until we were putting a deposit down that the property was leasehold. We almost pulled out but were offered assurances (to the effect that the lease is 999 years, the development will be managed by Bovis so they have a long -term interest in quality and ensuring ‘good behaviour’, and that all properties were being sold this way and it couldn’t be changed etc) and looked up the cost of buying the lease.

“We understood there was a law that requires the freeholder to sell the lease after two years if the leaseholder has been in occupation, and there are calculations for this cost. These gave us a figure of around £4,000, plus legal costs.” He says when they put this to Bovis, they agreed that’s what it would cost.

A few months later the Mellors received a letter saying Bovis had sold the freehold to Gateway Property Management, “thus negating some of the assurances we were given at sale”.

The Mellors also found that some properties on the estate had been sold freehold – mainly the more expensive ones. “We wrote to Bovis who said this had been a ‘commercial decision’, didn’t affect our agreement, and they couldn’t do anything any more as they’d sold the leases. They were basically washing their hands of us.”

The agreement allows Gateway to charge a ground rent of £250 a year, rising with RPI. The Mellors acknowledge that the increases aren’t as high as some in last week’s Money report, where householders face a doubling in ground rent every 10 years.

The problem now is how much it will cost to buy the freehold? He says a neighbour pressed Gateway for a figure, and was reportedly told it would be £15,000 to £35,000 “which is a ridiculously wide range and very different to our calculations, endorsed by Bovis.”

Bovis said: “Out of respect for customer confidentiality we cannot comment on individual purchases, but as a business it is our standard practice to sell our new houses on a freehold basis. In those extremely rare instances where this is not the case, this could be down to a number of local factors, such as building on a consortium site where conditions have been put in place as part of the land purchase. Throughout any house purchase customers will be kept fully informed of the sales process and structure, by our own teams and should also be advised and updated by their own solicitors.”

Gateway, based in Southend, Essex, runs GroundRents.co.uk. According to the website, “we act as strategic partners to property developers” by “releasing the value in their ground rents” with “leases that maximise their worth”. However, it adds that “we also take care of the leaseholders’ interests after sales”.

In a statement Gateway said: “We confirm Gateway Ground Rents owns a substantial portfolio of freeholds and through its associated company Gateway Properties Limited acquired the freehold interest of Mr and Mrs Mellor’s property in 2015. Obviously we cannot comment on the discussions your reader had with any third parties because we were not party to those discussions. When we receive enquiries from leaseholders about buying their freehold it is not our company policy to quote terms ad hoc over the telephone. If the parties are unable to agree terms through negotiation then the leaseholder would normally exercise rights they may have under the Leasehold Reform Act 1967 whereby the purchase price is set by a tribunal.”

Facebook Twitter Pinterest Solicitor’s letter to Taylor Wimpey: ‘Our client has asked us to notify you that she has had two prosepctive buyers withdraw … due to the excessive rent review clauses in the lease.’ Photograph: Bloomberg via Getty Images

‘Our house is now unsaleable because of a Taylor Wimpey lease”

Clair Scott is another new home buyer devastated by soaring ground rents that have made her £200,000 mid-terrace three-bed house in Bolton, built only six years ago, almost unsaleable.

“My husband and I ‘sold’ our house this summer, and it was due to complete at the end of September. Our buyers had ordered furniture, booked in decorators – the works. They signed all the contracts and then, a few days before completion, we were contacted because their solicitor read the leasehold document properly and spotted our ground rent clause: £295 per year, doubling every 10 years until the 50th anniversary.”

She claims her buyer’s solicitors advised them not to touch her house as it would be unsaleable given that by 2060 ground rent would be £9,440 per year. “The sale fell through, and all parties involved are devastated after losing a lot of time and money.”

Scott says she was “completely shocked” and checked with neighbours about their leases. A few residents on the estate of 50 homes were, she says, given the opportunity to buy the freehold from the outset at a very reasonable sum, while around half were on her 250-year lease, with ground rents doubling every 10 years. The rest, sold after January 2012, were on an RPI-linked lease.

Taylor Wimpey sold the leases to UK Ground Rent Estates Ltd for a figure understood to be £177,000.

“We were never given the option to buy,” says Scott. “Every time you want to ask a question [to the freeholder] you have to pay £110. Our neighbours inquired to buy – £46,000! No one has that sort of money, certainly not for a £200,000 house.”

Scott has written to her MP and sought legal advice, but says she still has “no idea what we can do. We are trapped by this god-awful house and a lease we can’t sell. We contacted the Home Builders Federation, and it contacted Taylor Wimpey, and we got a letter basically saying ‘you signed what you signed’ and there’s nothing they can do as they no longer own the freehold”.

She says that, as a first-time buyer, aged 25 at the time, she had no idea what she was letting herself in for. “The key messages from solicitors when we bought were: we can’t paint our door for two years, can’t have livestock on the land – all daft stuff. Not ‘by the way, this is a hellish lease that will potentially cause you a lot of financial trouble and inability to sell in the future’.

“Our legal paperwork just states the lease as a matter of fact, no extra commentary around it. As a young first-time buyer I wouldn’t have had a clue whether it was normal or not. I know leaseholds are common in Bolton, so I wouldn’t have thought much of it.

“We can’t sell – despite a few residents putting their heads in the sand and hoping we’ve had a spot of bad luck and most other buyers won’t care. Of course they will care!”

But Taylor Wimpey is not the only developer in Bolton leaving buyers shocked.

Another reader says she bought a new-build detached house from a separate developer on the other side of Bolton. She wanted to buy the freehold after one year but discovered the freehold would cost £17,600 instead of the £3,000 she expected.

She says the freehold has been sold to another company, Adriatic Land 3 Ltd. She adds that she had not been worried about leasehold because she had been in an older property in Bolton where the ground rent was £2.50 a year.

Taylor Wimpey said: “As a homebuilder, Taylor Wimpey’s core business does not include the management of freehold reversionary interests and so they are typically sold to third parties. Taylor Wimpey does not own the freehold [on Clair Scott’s development] and therefore does not benefit from the increases to ground rent or have a say in any associated charges. We can confirm that since around 2011 ground rent increases for Taylor Wimpey leasehold properties have been based on the Retail Price Index and increase every 10 years in line with the index, as per what is considered to be current industry standard.”

Facebook Twitter Pinterest One buyer says: ‘Persimmon left us with questions, the key one being that of acquiring the freehold.’ Photograph: Neil Hall/Reuters

‘We weren’t told about leasehold until the last minute’

Several readers contacted us to say how they were flummoxed to discover that the house they were buying was leasehold, with some only finding out very late into the purchase.

One reader, who preferred to remain anonymous, says she purchased a Persimmon new-build in December 2015. She claims: “The word ‘leasehold’ was not used until very, very late in the process, which was fast-tracked due to delays in building and my move-in date.

“I studied law at university and am interested in contracts, so I was shocked to finally be told that it was leasehold when I was already emotionally invested in the property and had booked my moving-in van!”

Another reader wrote to us about their experience of buying, and their legal position regarding acquiring the freehold.

He said: “Our family is outgrowing our existing three-bed semi and, in late August, Persimmon offered us a favourable part exchange for a four-bed detached home on one of its new estates. We were strongly persuaded to sign up to Persimmon’s preferred solicitors and, to date, we have had an amicable working relationship.

“However, when we asked questions regarding the terms of the lease (which, as yet, we haven’t signed) it has taken four-and-a-half weeks to get a reply... Persimmon was extremely vague and left us with more questions, the key one being that of acquiring the freehold.”

Persimmon said: “The type of property, freehold or leasehold, is discussed clearly with each customer prior to purchase and is described on every reservation form. Customers are under no obligation to use a solicitor known to Persimmon. We recommend solicitors who have knowledge and experience of a particular development. This improves speed of service for the customer, and can sometimes reduce costs.”

Held to ransom

There can also be a price to pay if a homeowner simply wants to add even the smallest of extensions.

Unlike traditional homeowners, buyers of new-build leasehold houses have to seek the approval of the freeholder if they want to add a conservatory, or a small extension – leaving them open to huge fees.

One reader, who wanted to remain anonymous for fear of jeopardising their plans, says she is contemplating a tiny extension to the rear of her home – so small it does not require planning permission. But the freeholder is charging her £1,615.

The bill breaks down as follows:

• £110 for the initial request to make alterations;

• £225 for a surveyor visit required by freeholder, paid by the resident;

• £600 for the surveyor report required by freeholder, paid by resident

• £200 “admin fees” to the freeholder;

• A further £480 for the freeholder’s solicitor fees.

Location, location, location

Will a plentiful supply of freehold homes become a thing of the past? New research reveals that 15% of all properties in England and Wales are on leasehold, although in some localities in the north-west the figure is as high as 94%.

Map: proportion of residential leasehold property transactions, 1995-present, in England and Wales Map: proportion of residential leasehold property transactions, 1995-present, in England and Wales

As developers focus on building high-rise apartment blocks in urban areas, the number of householders caught in leasehold contracts is increasing every year.

The research, by MyHomeMove, a provider of conveyancing services, found that in the King’s Cross regeneration area behind the train terminus in London, 100% of the properties are on leasehold.

In total, 53% of properties in the capital are on leasehold, and 46% in Manchester.

The leasehold map reveals a curious concentration of leasehold properties in many towns in the north-west.

Guardian Money’s probe into ground rents has also found that this is the region where developers are keenest on selling houses as leasehold. For example, in Bardsley, in Oldham, Greater Manchester, 81% of homes are on leasehold.

A check on recent sales in the area shows that the vast majority of homes, whether they are large detached houses for £250,000 or older terraces at £70,000, are sold on a leasehold basis.

But in other parts of the country, most homes are freehold.

For example, the research found that in Chorlton-cum-Hardy in Manchester, 86% of homes are freehold. I n north Birmingham’s B21 region, just 3% of all properties are leasehold.

The new-builds catching house buyers in a leasehold property trap Read more

Doug Crawford of MyHomeMove says: “The redevelopment towns and cities in England and Wales, over the last 30 years, means there are more leasehold properties on the market, as new-build apartment blocks are constructed and old warehouses are converted into flats.

“Controversially, even some new-build houses in suburban and rural areas are now sold as leasehold properties. The investment has given the countries’ housing stock a very welcome boost, but it also means that buyers are more likely to encounter a leasehold property than ever before.

“Leaseholds make up almost all of the housing stock in some of our cities’ redeveloped districts, and the proportion of leaseholds could grow even more as additional new developments come onto the market.”

But while leasehold is on the increase in England and Wales, it was abolished in Scotland in 2004 and phased out in most other countries.

The Long Leases (Scotland) Act 2012 automatically converted remaining long leases to outright ownership.

In Ireland, remaining leases are being phased out, with leaseholders able to purchase the freehold at much lower prices than is common in England and Wales.