Conveyancers have hit back at suggestions they should have prevented the scandal of new homes being sold as leasehold properties with rapidly escalating ground rents, which the government announced plans to ban last week. Rob Hailstone, chief executive and founder of the Bold Legal Group (BLG), which represents some 650 conveyancing firms, said many buyers would not have acted on warnings given about rent increases.
Solicitors recommended by the housebuilders – “approved solicitors” in the case of Countryside Properties plc – were not stooges, says Rob Hailstone, founder of the conveyancers the Bold Legal Group.
And buyers would not have paid any attention to ground rent clauses even if solicitors had pointed them out.
Rob Hailstone is quoted by Legal Futures:
“Most, if not all, solicitors and conveyancers would have spotted the rent increase clause in a lease and would have pointed it out to their buying client and any mortgage provider, along with a lot of other important issues.”
“The sad fact is that in many cases, their buying client will not read or act upon the advice given,” Rob Hailstone adds.
“Most buyers will want to proceed, understandably, with their purchase as quickly as possible, head down and with rose-tinted glasses on.”
But Rob Hailstone adds:
“I accept if the rent increase clause was not spotted and highlighted, the solicitor/conveyancer in question may be at fault.”
As for the consequences of buying a property that might subsequently prove unsellable owing to the ground rent terms:
“Solicitors are not valuers, estate agents, or mortgage providers – their clients can calculate [themselves] as to what the future rent might be.”
Rob Hailstone represents some 650 conveyancing firms in the Bold Legal Group.
The Council of Mortgage Lenders handbook at 5.14.9 says:
“We have no objection to a lease which contains provision for a periodic increase of the ground rent provided that the amount of the increased ground rent is fixed or can be readily established and is reasonable.
“If you consider any increase in the ground rent may materially affect the value of the property, you must report this to us.”
Bold Legal Group is a trade association and Rob represents a lot of the smaller High Street firms as well as some of the market leaders.
Beth Rudolph of the Conveyancing Association said: “The CA view is that a conveyancer is duty bound to act in the best interests of the client and report to them anything that would be considered in conflict with their interests at that time.
“If they don’t achieve that then they are open to complaint from their customer either via their own complaints process, the Legal Ombudsman or their Regulator. There is plenty of customer protection available if the conveyancer fails in that duty.”
“It would be a much better position if there were no onerous lease terms in the first place to be advised upon by the conveyancer, estate agent, marketing office or valuer.
“These onerous terms should simply not exist, particularly where there is the opportunity for abuse of the control which the developers have in this restricted market place.
“They should be offering leases that offer a balance of burden and benefit to the consumer that is fair.
“The balance has now shifted significantly in favour of the freeholder in these leases with onerous lease terms and we need to ensure that DCLG get that message through the responses to consultation and are not given the impression that they can solve the problem by relying on consumer protection that already exists.”