Landlords saddled with hefty ground rent charges on homes they rent out are urged to sue their conveyancing landlords for giving poor advice.
Around 100,000 new build homes – many owned by buy to let investors – are thought to be affected.
In many cases, landlords may claim compensation from advisers who failed to tell them about the costly implication of leasehold ground rents.
David Brumpton, a professional negligence specialist with Nottingham law firm Nelsons’, suggests landlords who have purchased a leasehold rental home in the past decade should check the terms of their contracts with the builder.
“They have also added clauses in the lease that allow them to review the ground rent periodically, for example, every five, 10 or 25 years. Typically, the review clause allows the freeholder to increase the ground rent at each review,” said Brumpton.
“In theory, a ground rent that doubles every 10 years doesn’t sound too bad. However, most leases are set for a long term such as 999 years. If a ground rent of £250 per year doubles every 10 years, you can expect to pay £16,000 per year after 60 years.
“For many people, that’s simply unmanageable. This is also not something a landlord of a buy to let property could expect to pass on to tenants either.”
The government’s Competition & Markets Authority is already probing the possible misselling of leasehold homes that could mean builders face compensation claims.
Ministers have already announced new homes will be sold as freeholds, with ground rents on new leases set to zero.
“Landlords who have found themselves unwillingly involved in the leasehold misselling scandal can bring a professional negligence claim against the conveyancing solicitor they instructed to help with the purchase of the property,” said Brumpton.