There has been much media and parliamentary scrutiny recently of Taylor Wimpey’s policy to include 10-year doubling ground rents on new build leasehold properties. A number of Taylor Wimpey’s ex-customers are considering legal action against the conveyancing solicitors who acted on their behalf, as they feel conned by the lease terms and claim their properties are now unsellable.
Louie Burns, Managing Director of leasehold enfranchisement specialists Leasehold Solutions, argues that the legal profession should brace itself for a wave of litigation from home owners who feel they were given inadequate advice by their conveyancing solicitors or valuers.
Burns said: “The case of Taylor Wimpey highlights an endemic problem with new build property in the UK, as more and more house builders are including onerous ground rent schedules on new build leasehold properties. Recent legislation, including the Disclosure Act (2014) and the Consumer Rights Act (2015), gives home owners the opportunity to seek legal redress against solicitors for professional negligence, where they can prove they were not given adequate information to make an informed decision.”
The Consumer Rights Act specifically mentions that complex future financial implications must be spelt out very clearly, and warns against confusing wording around these issues. If the advice or terms offered by solicitors were found to have been obfuscated then the legal firms involved would be open to a legal challenge by the consumer. This represents a significant shift from the previous accepted consumer law concept ‘buyer beware’.
Burns continued: “What would qualify for professional negligence in these cases is the lack of written advice on the serious future financial implications of the terms of the lease in question, namely the onerous ground rent schedules; where this isn’t evident the solicitor may be held to account.
“The Taylor Wimpey case is just the tip of the iceberg; this issue is on a scale akin to the PPI scandal which has dogged the banking industry for nearly a decade.”
“The cost implications can be huge for an errant solicitor (or valuer) but each case is different. In a recent example, home owners won their case by demonstrating the implications of the ground rent increases were not adequately explained, leading to a settlement which imposed an average of £17,000 in costs for each law firm involved. On a more complex case it could be much higher.”
Research by Leasehold Solutions suggests that around 80% of new build flats are sold with onerous ground rent schedules included in the lease terms. More than 42,500 new build leasehold properties were sold during 2015.
Taking the average costs from Leasehold Solutions’ recent example, the company has estimated that the cost to the legal profession from professional negligence claims could reach £578 million for 2015 alone.
Burns concluded: “From a risk point of view, all those involved in the marketing and sale of leasehold properties, both new build and existing homes, must now review the way they present advice to their clients, to ensure they do not return at a future date to seek legal redress.
“In order to achieve the openness and transparency required under the Consumer Rights Act, conveyancing solicitors must ensure that the lease terms are expressed fully, clearly and legibly, containing no concealed pitfalls or traps.”
