The complaint

Mr G instructed the firm to complete a leasehold property purchase.

Over one year after the purchase was complete, Mr G contacted the firm as the property management company were chasing him for service charges and outstanding ground rent that were due before he owned the property.

When Mr G challenged the charges with the property management company, he was informed that the ground rent was £300 per year. He was surprised because he thought the firm had told him that the ground rent was peppercorn (a very small amount). Mr G also located a deed of variation, which he did not see at the time of purchasing the property, and this mentioned that the ground rent would increase on a sliding scale. Mr G said he would not have purchased the property if he had known this as he would not be able to sell the property later if he wished.

Mr G complained that:

The firm failed to advise Mr G of the deed of variation; and
The firm failed to advise Mr G of the outstanding fees on the property and did not make arrangements to resolve this.

The outcome

We concluded that the firm’s service was unreasonable for both complaints.

The evidence showed that the firm did not provide Mr G with accurate information about the rising ground rent, although this was stated in the deed of variation and other documentation that the firm had at the time of the purchase.

We also found that the firm did not inform Mr G of the service charge and ground rent fees that were outstanding, although they had documentation to indicate that this was the case. The firm did not provide us with a reasonable explanation for failing to ensure that Mr G would not be liable for these costs.

Mr G provided evidence to show that mortgage lenders would not provide a mortgage on this property due to the rising ground rent. This meant that Mr G could not re-mortgage or sell the property on if the potential buyer required a mortgage. The only way to allow Mr G to do this would be to extend the lease.

Mr G also suffered emotionally because of the firm’s service. He was worried about his finances and experienced significant distress as he had been trying to resolve complex issues that the firm should have been able to advise of and prevent. We also considered that the emotional impact had been worsened by the firm’s complaint handling, as Mr G had to send his complaint several times to different staff members to get a response.

We proposed that a remedy of approximately £18,000 should be paid to Mr G to put him back into the position he would have been in had the service been reasonable. This included costs to:

extend the lease so the ground rent becomes peppercorn;
cover the legal fees Mr G would incur to extend the lease;
cover the outstanding service charge; and
compensate Mr G for the emotional impact of the firm’s poor service with a payment within our significant category.

Mr G accepted the final decision which meant that it was binding on the law firm.

Guidance:

Best practice complaint handling guide | Legal Ombudsman

Guidance: Our approach to determining complaints | Legal Ombudsman

Guidance: Our approach to putting things right | Legal Ombudsman