Don't make a bad investment in the UK

We've created a guide to help you avoid pitfalls, save time, and make the best long-term investment possible.

Buying property in the UK: scams and pitfalls

Last updated on 

risks pitfalls buying real estate The United Kingdom

Everything you need to know is included in our The United Kingdom Property Pack

The United Kingdom's real estate market remains a top choice for foreigners, offering diverse property options and a robust economy.

If you're not a local resident, dealing with the property market in this area can be a bit of a maze. Be prepared for potential obstacles and surprises.

Our group of property buyers and local partners have shared various problems with us. We've listed them all in our United Kingdom Property Pack.

This article will give you a quick overview of some of the potential pitfalls you could face.

Is it safe or risky to invest in real estate in the United Kingdom?

The UK, on the whole, is safe for property investment, but that doesn't make it immune to scams.

Take the infamous case of the "North Point Global" development in Liverpool. Foreign investors were promised luxury apartments; however, after taking millions in deposits, the developers left sites abandoned.

It's a stark reminder that even in the UK's mostly regulated market, vigilance is crucial.

Nowhere is the leasehold conundrum more prevalent than in the UK.

London's Southbank Place, a prime real estate development, has many flats sold as leaseholds. Unfamiliar buyers might overlook the implications, but when the ground rent doubles every decade, the costs quickly become exorbitant. This system is alien to many foreign investors, who often expect to own the land associated with their properties.

While the UK property buying process may appear transparent, there are layers to be uncovered.

The "gazumping" phenomenon, where sellers, after accepting one offer, switch to a higher one, leaves many buyers in the lurch. This is a legal yet frowned-upon practice, uniquely prevalent in hot UK markets like London.

Recall the infamous Candy brothers' case in London. A dispute over a £1 billion luxury development scheme showcased the extent to which property disagreements could escalate. However, the UK's judicial system, known for its diligence, ensured a fair trial, underscoring the country's commitment to justice in property matters.

The UK government's measures to regulate property purchases, particularly the Stamp Duty Land Tax (SDLT) on second homes, significantly impacts foreign buyers.

A Hong Kong investor, for instance, planning to buy a second home in Manchester, will find themselves paying 3% on top of the standard SDLT rates—a costly oversight if not anticipated.

Many foreigners, particularly those from Asia, have flocked to UK property markets, lured by post-Brexit depreciations in the pound.

However, some found themselves ensnared in the UK's complex property tax web.

An investor from Singapore, having acquired a series of properties in Birmingham, was later dumbfounded by an unexpected Capital Gains Tax bill upon selling—one that could have been avoided with better initial advice.

Buying real estate in the UK can be risky

An increasing number of foreign investors are showing interest in the UK. However, 90% of them will make mistakes. Avoid the pitfalls with our comprehensive guide.

buying property foreigner The United Kingdom

Potential real estate buying mistakes in the United Kingdom

The concept of "Chancel Repair Liability"

One unique pitfall you might encounter when buying residential property in the United Kingdom, especially if you're a foreigner, is overlooking the implications of "Chancel Repair Liability."

This is a historic legal obligation that requires certain property owners to contribute to the repair costs of the chancel of a Church of England parish church.

Chancel repair liability dates back to medieval times, when local parishes were responsible for the upkeep of the church chancel. This obligation can still be legally enforceable today, and it could apply to properties that are within the historical parish boundaries that have a Church of England church, regardless of the property's current use or the owner's religious affiliations.

You should be aware that not all conveyancers or solicitors might flag this issue, as it is somewhat obscure and not always relevant.

However, if it does apply to the property you're interested in, the financial implications can be significant. There have been cases where homeowners faced substantial unexpected costs due to chancel repair liabilities.

The frequency of this issue is not high, but it's unpredictable, as it depends on the specific historical and geographical context of the property.

The risks related to "Flying Freehold"

Another unique aspect in the UK property market that could catch you off guard is the concept of "Flying Freehold."

This occurs when a part of a freehold property overhangs or underlies another freehold property. It's a peculiar situation often found in older, terraced houses or buildings with multiple occupancies in the UK.

For example, imagine you're buying a flat in a converted Victorian house in London.

Part of your bedroom might be situated directly above a room that's part of the neighboring flat, which you don't own. This overlapping portion is what's termed as a "flying freehold."

You should be particularly cautious with flying freeholds because they can lead to complex legal issues. These include difficulties in enforcing repair and maintenance responsibilities for the overlapping parts, challenges in obtaining a mortgage, and potential disputes with neighbors.

Flying freeholds are relatively uncommon, but they are more likely to be found in densely populated cities and towns with older housing stock. It's crucial that you ask your solicitor to check whether the property you're interested in has any flying freehold elements.

Additionally, you should verify that there are appropriate agreements and rights in place for access, repair, and maintenance of the flying freehold area.

Don't lose money on your property in the UK

100% of people who have lost money in the UK have spent less than 1 hour researching the market. We have reviewed everything there is to know. Grab our guide now.

buying property foreigner The United Kingdom

The concept of "Leasehold Scandal"

A third unique aspect you should be aware of when buying residential property in the UK is the concept of "Leasehold Scandal."

This primarily affects houses and flats sold as leasehold, a common practice in the UK, particularly in England and Wales. In a leasehold arrangement, you own the property for a set number of years but not the land it's built on. This system contrasts with freehold, where you own both the property and the land outright.

The Leasehold Scandal refers to a situation where buyers of new-build homes were trapped in exploitative contracts with rapidly escalating ground rents.

These ground rents could double every 10 or 25 years, significantly increasing the cost of living in these properties and making them difficult to sell. Furthermore, some leaseholders found that their freeholds had been sold to investment companies without their knowledge, which then increased the price of buying the freehold.

As a knowledgeable buyer, especially if you're considering a new-build property, you should be extremely cautious about the leasehold terms. Always scrutinize the ground rent clause to understand how it will increase over time.

Since awareness of this issue has grown, there has been governmental scrutiny and calls for reform, but many properties are still subject to these conditions.

"Common Repairs" concern in the UK

Another unique and potentially confusing aspect when buying residential property in the UK, particularly in Scotland, is the concept of "Common Repairs."

This situation often arises in tenement buildings, which are common in Scottish cities like Edinburgh and Glasgow.

In a tenement, multiple parties own separate flats within the same building. The concept of common repairs pertains to the shared responsibility for maintaining and repairing common parts of the building, such as the roof, stairwells, and external walls. This differs from many other countries where such responsibilities might be more clearly defined or managed by a single entity, like a homeowners' association.

You should be aware that, in Scotland, there isn't always a formal management company in place to handle these issues.

Instead, the responsibility for common repairs falls to the individual owners. This arrangement can lead to challenges, particularly when trying to reach an agreement among all the owners for necessary repairs and their associated costs.

Before purchasing a flat in a tenement building, you should investigate the property's arrangements for managing and funding common repairs. Check if there's a 'factor' (a property manager) appointed, and understand any existing arrangements among the owners.

Also, inquire about any upcoming major repairs, as these can be costly.

Get the full checklist for your due diligence in the UK

Don't repeat the same mistakes others have made before you. Make sure everything is in order before signing your sales contract.

buying property foreigner The United Kingdom

"Restrictive Covenants" potential issue

Another unique aspect you should be aware of when buying property in the UK, especially in England and Wales, is the potential for "Restrictive Covenants" on the property.

Restrictive covenants are conditions written into a property's deeds or contract by a previous owner which restrict the way the current owner can use the property.

These covenants can cover a wide range of restrictions, such as prohibiting certain types of alterations or extensions to the property, restricting the type of business activities that can be conducted from the property, or even limiting the types of vehicles that can be parked on the premises.

For example, you might find a property in a rural area of England that seems perfect, but the restrictive covenant could prevent you from building an extension, converting part of the property for commercial use, or even keeping certain types of animals on the property.

It's crucial that you thoroughly review the property's title deeds to identify any restrictive covenants.

These covenants can be quite old and may no longer seem relevant, but they are legally binding and can be enforced by the original covenantor or their successors.

The risk associated with "Japanese Knotweed"

Yet another unique aspect to consider when buying residential property in the UK, particularly in England, is the risk associated with "Japanese Knotweed."

This is an invasive plant species that can cause significant damage to property and is notoriously difficult to remove.

Japanese Knotweed can grow through tarmac, concrete, and drains, potentially causing structural damage to buildings. Its presence on or near a property can affect the property's value, its insurability, and even the ability to obtain a mortgage. In England, sellers are legally required to declare if the property is affected by Japanese Knotweed on the TA6 property information form, part of the standard pre-contract enquiries.

For instance, if you're looking at a property in a suburban area of England, even if the property itself is not directly affected, the presence of Japanese Knotweed in neighboring properties or nearby land can pose a risk.

It's important that you specifically ask about Japanese Knotweed during the buying process. You should consider getting a professional survey done to check for the presence of this plant, as it might not be immediately obvious, especially to someone unfamiliar with it.

Remediation can be costly and time-consuming, involving specialist treatments over several years.

Don't sign a British document you don't understand

Buying a property in the UK? We have reviewed all the documents you need to know. Stay out of trouble - grab our comprehensive guide.

buying property foreigner The United Kingdom

The issue of "Overage Clauses"

Another unique aspect in the UK property market, particularly pertinent in England and Wales, is the issue of "Overage Clauses" in property transactions.

An overage clause, also known as a "clawback" or "uplift" clause, is a provision that can be inserted into a property sale agreement which entitles the seller to receive additional payment if certain conditions are met in the future.

For example, if you buy a piece of land or property that has potential for development, the seller may include an overage clause in the contract. This clause could stipulate that if you obtain planning permission for development within a certain time frame, you must pay the original seller an additional sum of money.

This amount is often a percentage of the increase in the land's value as a result of the planning permission.

You should be particularly vigilant about overage clauses when buying land or properties with development potential. These clauses can be complex and can remain enforceable for many years, sometimes decades.

They can significantly affect your future plans for the property and its financial viability.

The dangers of "Radon Gas"

A further unique aspect to consider when buying property in the UK, particularly in England, is the risk of "Radon Gas."

Radon is a naturally occurring radioactive gas that can accumulate in buildings, particularly in areas with certain types of underlying rock and soil. Prolonged exposure to high levels of radon gas can pose health risks.

In the UK, certain areas, particularly in the South West of England, are known to have higher levels of radon. When buying a property in these areas, it's important to check the radon levels.

The UK Health Security Agency provides a radon map where you can check the likelihood of high radon levels in any given area.

For instance, if you are considering a property in Cornwall or Devon, it’s advisable to conduct a radon risk assessment. While this is not a mandatory part of the property buying process, it's an important consideration for your health and safety.

Radon levels can be mitigated, but this can involve additional costs. Measures include increasing underfloor ventilation, installing radon sump systems, or improving the ventilation of the property.

Thinking of buying real estate in the UK?

Acquiring property in a different country is a complex task. Don't fall into common traps – grab our guide and make better decisions.

buying property foreigner The United Kingdom

"Rights of Way" issues and risks

Another distinct aspect to be aware of when buying property in the UK, and particularly in England and Wales, is the issue of "Rights of Way."

This refers to the legal right for the public or certain individuals to pass through a piece of land or property, which can sometimes exist even on private property.

For example, if you're considering buying a rural property or a property with substantial land in England or Wales, there might be ancient footpaths or bridleways crossing the land. These are protected under UK law, and the public may have the right to access these paths. This means you cannot obstruct or move the path without legal authority, and you might have to maintain it to a certain standard.

Rights of Way can also exist in urban areas, where historical pathways between homes or to local amenities have been established over time.

The existence of such a right could affect your privacy, how you use your land, and future development plans.

It's crucial to check if there are any Rights of Way on or adjacent to the property you're interested in. This information is usually noted in the property's title deeds or local authority searches.

Not being aware of Rights of Way can lead to disputes with neighbors or the local community, and can even result in legal action if the right is obstructed.

The concept of "Listed Buildings"

An additional unique aspect in the UK property market, particularly in England, is the concept of "Listed Buildings."

When you buy a property that is a listed building, you are purchasing a property that has been officially designated as being of special architectural or historical interest.

Listed buildings in the UK are classified into three categories: Grade I for buildings of exceptional interest, Grade II* for particularly important buildings of more than special interest, and Grade II for buildings of national importance and special interest.

Owning a listed building comes with a responsibility to maintain its character and appearance, and any changes to the property, including repairs and internal alterations, may require special permission known as "Listed Building Consent."

For instance, if you're looking to buy a charming old cottage in the Cotswolds, and it turns out to be a Grade II listed building, you will need to adhere to strict guidelines for any renovations or alterations.

Even minor changes like replacing windows or doors might require approval from the local planning authority.

The frequency of listed buildings is relatively high in the UK due to its rich historical heritage.

It's crucial to check whether a property is listed and understand what grade it is.

Failing to comply with the regulations can lead to legal action and potentially hefty fines.

Make a profitable investment in the UK

Better information leads to better decisions. Save time and money. Download our guide.

buying property foreigner The United Kingdom