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'Buying a flat ruined my life': Leaseholders plead for tougher legislation against home ownership 'scam'

When Chris Hayes bought his first property in 2017 aged just 28, he didn't realise the decision would "ruin his life".

The flat, in central Manchester, was newly built when he moved in. But within a year water started leaking from the "badly built roof" and he is now facing a £170,000 bill to repair it.

The 34-year-old says paying that would leave him "homeless, bankrupt and possibly even jobless", as going bankrupt would disqualify him from his profession in financial services.

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But Chris, not the developer, is liable for the costs under the terms of his lease - the "feudal" arrangement that allows someone to buy a property on land or in a building they don't own.

"The biggest mistake of my life was buying this flat," he said. "It's basically ruined my life."

Chris is one of a dozen leaseholders who spoke to Sky News as the government's flagship Leasehold and Freehold Reform Bill makes its way through parliament.

Ministers say the legislation will stop "abuses" in the controversial system by making it easier and cheaper for people to extend their lease, buy the right to their freehold and gain the right to manage their block.

But leaseholders say it doesn't go far enough in protecting them from being "extorted" by freeholders, who own the land they lease, and managing agents, who typically run building services on the landlords' behalf.

Chris said he complained about the roof leaking as far back as 2018 but "nothing was done to rectify this" and the problems are now so bad, the insurance provider "is refusing to pay out".

To fund the repairs, his service charges for 2024 were raised to £14,000 a month days before Christmas, and he has been told he will have to leave his home for seven months while the roof is fixed, and cover the cost of the temporary accommodation himself.

He is weighing up his legal options. But he isn't feeling hopeful.

'My £800,000 dream flat is now worthless'

Almost 200 miles away in north London, Dan Bruce has spent five years and £300,000 in legal fees fighting for redress over problems to his building that was constructed so poorly, that a structural engineer has assessed the whole thing might have to be demolished.

Dan, 40, poured his life savings into the £800,000 apartment in Camden, which is now effectively worthless as he can't sell it. The property was built in 2018 but almost immediately after moving in, he began noticing serious defects ranging from cracks in the external wall to ceiling leaks and rotting timber.

The government intervened to ask Camden Council to issue a remediation notice against the developer - with Housing Secretary Michael Gove even calling the situation "deplorable". But under the terms of Dan's lease that would have allowed the developer, who is also the freeholder, "to charge us to fix their own shoddy work", Dan said.

Instead, he has had to spend thousands of pounds in an "exhausting" legal fight against the developers, contractors and insurers involved in signing off the building as safe.

Dan, who has yet to receive a penny in compensation, said it has taken a "huge toll on his mental and physical health", with the stress inflaming his psoriasis and "draining me of the energy to do things I used to enjoy".

While his case highlights the wider issue of poor workmanship and weak consumer protection in the new-build sector, it also goes to show the deep unfairness embedded in the leasehold system, he added.

"Why is it that when it benefits the freeholder, you're a leaseholder, but when it doesn't, you're a homeowner? I shouldn't have to deal with any of this as all I really have is a piece of paper saying I am allowed to occupy this flat."

He called the government's bill "weak" and said it should include measures to prevent leaseholders from having to pay for latent defects.

Chris added: "There's so much further the bill needs to go with regulation around management companies as they seem to be able stick bills at you with no rhyme or reason."

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New bill means leaseholders can 'take back control'

The proportion of new-build houses sold as leasehold rose from 7% in 1995 to a peak of 15% in 2016, according to government data. There are five million leasehold properties in England in total - equivalent to one in five dwellings.

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The Leasehold and Freehold Reform Bill, championed by Mr Gove, will abolish leasehold on new houses but not new flats, which make up 70% of leasehold properties.

Its main provisions include relaxing the criteria required for leaseholders to extend the length of a lease, buy the freehold and manage their buildings. It will also introduce standardised service charges to increase transparency and protect leaseholders from paying for their freeholders' legal costs when challenging bills.

Mr Gove said this will ensure leaseholders can "take back control of their property" and ensure service charges, as well as ground rents, are transparent and "reasonable".

But Labour MP Barry Gardiner, who has spent 20 years campaigning to abolish leasehold and recently made a documentary on it, said the bill is "133 pages of tinkering with a fundamentally unjust system".

"Leasehold needs abolishing, not updating. It's a relic of a feudal system," he added.

Leasehold system 'rotten to its core'

Mr Gove had promised to scrap the system entirely but was reportedly forced to row back on the pledge over concerns there was not enough time before the next general election to enact such a major reform.

The English leasehold system has its origins in the 11th century and is deeply entrenched in landownership and property laws.

There have long been calls to abolish it, with campaigners calling it "rotten to its core".

Those who spoke to Sky News detailed issues ranging from inflated service charges and ground rents to a lack of transparency over costs, threatening behaviour from management agents, excessive administration fees and building insurance and disproportionate costs to extend leases or buy the freehold - with many cases of the freehold being sold without them even realising.

Many described the system of homeownership as a "scam", adding that they were kept in the dark about the true extent of what they would have to pay.

Mum-of-two Sherren Kerr didn't anticipate any issues when she bought a house in Camden in 2016 that was advertised as a "virtual freehold", with a 999-year lease and no ground rent or service charges - only building insurance.

But that shot up from £800 a year to £2,500 a year when the freehold "was sold unbeknownst to me".

She said the situation was causing a "huge amount of stress and depression".

"There is nowhere to turn when faced with these bills," she said. "This is my family home and they on several occasions have made it quite clear that I am just a tenant."

'It feels like the post office scandal'

Sky News has also seen evidence of leaseholders being threatened with forfeiture - which enables a landlord to seize a leasehold property - for asking for basic details about how their bills have been calculated. Redress schemes to complain are lengthy and expensive and the outcomes are not legally binding, allowing freeholders to "act with absolute impunity", said one young mum, who did not wish to be named.

"It feels like a scandal similar to the postmaster one where innocent people's lives and mental health are being destroyed by bullies who will not play by the rules," she said.

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Leaseholders who can't afford to stay in their properties have few routes out because the punitive charges make it nearly impossible to sell - leaving them effectively trapped.

Gill Potter, 56, says her buy-to-let flat in Hertfordshire is a "worthless asset" because of a "toxic ground rent clause" that states the amount payable will rise every 10 years by inflation.

This is a charge freeholders can collect simply for owning the land - not for any service. There are cases of the fee being as high as £8,000 per year, according to Mr Gardiner.

'It's a scam'

Gill's charge is currently a fraction of that, £250 per year, but her buyer's lender refused to offer a mortgage unless the ground rent was capped - something her freehold would not agree to.

She is desperate to sell as mortgage rates have increased from £268 a month to £1,187. However, seeking a Deed of Variation - effectively a new lease - will cost her between £20,000 to £30,000.

Gill said: "I feel as though I was mis-sold my property because I was unaware of the implications of that clause buried in the long and densely worded legal document - and apparently so were my solicitors, who didn't mention it at the time of purchase.

"With leasehold, you're not buying the flat. You're buying the right to live in the flat. It's a scam."

The National Leasehold Campaign (NLC) is calling for ground rents to be reduced to a peppercorn value - effectively zero, as part of the bill. The government is running a consultation on capping existing ground rents, having abolished new ones, but no decision has been made yet.

The NLC urged the government to "be on the right side of the people" amid a "David and Goliath battle" against freeholders who are pushing back against the proposals. The campaign ultimately wants the government to make commonhold mandatory.

Labour said it will be down to them to abolish this "archaic and iniquitous system" if they get into government, but the party has vowed to try and strengthen the bill with amendments including the regulation of managing agents and the abolition of forfeiture.

A Department for Levelling Up, Housing and Communities spokesperson said: "The Leasehold and Freehold Reform Bill will make the long-term and necessary changes to improve homeownership for millions of leaseholders across England and Wales.

"We do not think it is fair that many leaseholders face unregulated ground rents for no guaranteed service in return - that is why we have just consulted on a range of options to cap ground rents for existing leases."