After years of hard work and saving, Carole Patterson was overjoyed to finally get on the property ladder a decade ago.
But the £170,000 one-bed flat in South London has become her worst nightmare as she faces an annual ground rent bill that will eventually cost her £1 million every year.
Carole, 44, is now one of a growing number of scorned buyers taking legal action against lawyers who they say failed to point out costly clauses in leasehold contracts.
Double trouble: Carole Patterson’s one-bed flat in South London has become her worst nightmare as she faces a ground rent bill that will eventually cost her £1 million every year
The mum-of-two’s contract means her annual ground rent — a charge paid to the freeholder — will double every five years.
So while her bill is around £1,050 this year, in 50 years’ time she would have to pay £1,075,200 a year to keep the home, rising to half a billion pounds in 100 years’ time.
The Government launched an investigation into the leasehold scandal in 2017 after experts raised concerns about how developers sold residential properties with spiralling ground rents.
In January, ministers proposed new reforms to crack down on ‘unfair and abusive’ leasehold contracts.
Huge shock: Carole Patterson faces ever growing bills
These included allowing leaseholders to extend their lease agreements ‘at zero ground rent, for a term of 990 years’. But the plans have yet to be debated in Parliament and may not start until 2022.
Meanwhile Carole must start paying the excessive ground rent bills and there is no guarantee the reforms will help her case.
Instead, the freeholder has offered to change the terms of the lease for a one-off payment of £100,000 – a quarter of the value of the property.
Carole, an HR administrator, is hoping to cover this cost by suing her former law firm FBC Manby Bowdler for negligence after it failed to alert her to the ‘ridiculous’ clause.
She says she only became aware of it in 2018 when the freehold was bought by MEA Real Estate Ltd who told her their plan to bill her for the spiralling costs.
Three other residents live in the same building, in East Dulwich, but do not have to pay any ground rent. Carole says this is because their lawyers likely spotted the clause and had it taken out.
She now fears her home is worthless with the onerous clause attached to it.
Her case has been taken on by London firm Osbornes Law who are one of many firms advertising to help leaseholders sue their lawyers who failed to spot clauses that allow ground rents to double.
The increasing scrutiny around these agreements has caused law firms to start encouraging leaseholders to sue solicitors who let them sign the contracts in the first place
Osbornes argues that Carole’s original law team failed to provide a ‘reasonable standard’ of service when she first bought the flat.
Carole, who now rents out the flat, says: ‘It has been a very stressful situation.
‘I first got the letter finding out about the clause when the freehold was sold on. I had no idea about it before. I was pregnant at the time and it was such a horrible position to be in.
‘I just feel so frustrated that something I worked so hard for and saved for has no value at all now. I bought this flat as an investment for my pension.
‘The ground rent on Buckingham Palace wouldn’t be as much as what I would be paying at the end of my lease.’
Last month the Competition and Markets Authority (CMA) ordered two of the nation’s biggest housebuilders — Countryside Properties and Taylor Wimpey — to remove clauses in their contracts that saw ground rent double every ten to 15 years.
The increasing scrutiny around these agreements has caused law firms to start encouraging leaseholders to sue solicitors who let them sign the contracts in the first place.
Shilpa Mathuradas, head of litigation at Osbornes Law, says: ‘Our client has been left in a horrendous position of not being able to sell her property while the ground rent doubles every five years.’
FBC Manby Bowdler says it is an independent firm of solicitors regulated by the Law Society that adheres to the Solicitors’ Professional Code of Conduct.
A spokesman says: ‘The issues which arise in this case are much broader than relating to a particular firm of solicitors and are being addressed by Parliament.’ Money Mail could not reach the freeholder MEA Real Estate Ltd for comment.