A survey of home-buyers has issued a “resounding indictment” of the lack of information provided by their lawyers and rising concern about developers forcing them to use recommended solicitors.
According to the pressure group the National Leasehold Campaign (NLC), nine out of 10 leaseholders said their lawyer did not explain the difference between leasehold and freehold, and a similar number said they would not buy their property on the same terms again.
More than three-quarters did not feel fully informed and supported by their solicitor during the conveyancing process and a similar number regretted buying a leasehold property.
The research is intended as a counterpoint to the Solicitors Regulation Authority’s (SRA) thematic review of residential conveyancing, published in April, which involved visits to 40 law firms and a review of 70 files.
The review identified some problems with information provision, but concluded that “in the majority of cases, conveyancing firms actively engage with their clients and fulfil their obligations to them”.
Nearly 1,500 members responded to the online NLC survey. Although the NLC acknowledged the risk of bias in the cohort, co-founder Cath Williams told Legal Futures that “the sheer volume of NLC members all providing similar accounts of their conveyancing experience does indicate a real problem that cannot be ignored or dismissed”.
Some 58% of respondents said they used the solicitor recommended by the developer, with 38% saying they were offered incentives to do so, in particular having the legal fees paid for or at least discounted.
A discounted property price was this was the second most common incentive, followed by offers of upgrades to the finishes on the property – such as white goods – paid stamp duty and paid removals.
The NLC said “several” people reported threats if they did not use the recommended solicitor, including losing their purchase altogether, or losing other advertised discounts, not being able to complete on time, and not being able to use the Help to Buy scheme.
“NLC totally abhors this approach and would suggest that this aspect of mis-selling requires in-depth investigation,” the survey said.
The group said it would share the findings with the Competition and Markets Authority, which recently announced investigation into potential mis-selling of new-build properties.
Some 62% of respondents said they did not meet their conveyancer face to face – the opposite of what the SRA found. The NLC argued that tenure information was best imparted in person, or at least by phone, rather than by email or letter, which were the main two ways people heard from their lawyer.
Ten respondents reported that they never spoke to their lawyer, and just communicated through an intermediary such as the developer site office or the mortgage broker.
Most said they did not receive, or could not recall receiving, a client-care letter or information on how to complain about the solicitor.
Among the other findings were that 91% were not informed about the contractual obligations of estate rent charges or maintenance fees, 84% were not told that the freehold could be sold onto a third-party investor, and over 80% were not informed about the legal right to buy their freehold.
Ms Williams, a university lecturer, said: “For far too long leaseholders have been told that it is their own fault for signing these toxic agreements, but this report shows how little information they were actually given meaning they were not able to make an informed choice when deciding to buy or not.
“The acid test has to be that almost all would not buy their property again on the same basis.
“Just as disturbing is the fact there seems to be a lot of pressure for people to use the developers’ recommended panel solicitors which suggests collusion.”
The NLC’s aim is to abolish “feudal” leasehold laws, and campaigns to make commonhold mandatory for flats, as well as calling for financial redress for those “mis-sold” leasehold properties.
While welcoming the government’s decision that in future new-build homes cannot be sold as leaseholds, Ms Williams said this made the situation “even more dire for leaseholders trapped in properties with onerous ground rent terms, stinging permission fees and rip-off service charges”.