Leaseholds on new-build houses could be banned in bid to end ‘unjust’ practices
Properties can be rendered unsellable because of escalating leasehold fees.
Leaseholds on new-build houses could be banned under Government proposals to cut out abuses of the system.
Homebuyers can face exorbitant costs and properties can be rendered unsellable because of leasehold fees, but plans put forward by the Communities Secretary aim to put a stop to “unjust” and “unnecessary” practices.
Sajid Javid wants to restrict ground rents to zero and prohibit future houses being sold as leasehold in England, after a rise in developers selling houses under terms which usually apply to flats, particularly in the North West.
The proposals, which are subject to an eight-week consultation, aim to make future leases fairer by reducing ground rents so they “relate to real costs incurred”.
The plans include measures to close legal loopholes to protect leaseholders who can be left vulnerable to possession orders, as well as changing the rules on Help to Buy equity loans so they can only be used for “new built houses on acceptable terms”.
Mr Javid said: “It’s clear that far too many new houses are being built and sold as leaseholds, exploiting home buyers with unfair agreements and spiralling ground rents. Enough is enough. These practices are unjust, unnecessary and need to stop.
“Our proposed changes will help make sure leasehold works in the best interests of homebuyers now and in the future.”
More than four million people live in leasehold properties in England – around a quarter of which were leasehold houses, according to the Department for Communities and Local Government.
They have a legal right to occupy and use the property for a set period, typically from 99 to 999 years, with certain conditions set out in the lease.
Leaseholders pay fees to the freeholder who retains legal ownership of the ground on which the leaseholder’s home is built.
Sir Peter Bottomley, co-chair of the all-party parliamentary group on leasehold reform, welcomed the crackdown but said action should be taken to help those with unfair existing leases.
The Conservative MP told the Press Association: “Having control and hopefully abolition of unjustified and unnecessary fees, which would apply to existing leasehold as well as future ones, then I would argue that if not covered by existing law, there should be action taken by Parliament so that unfair existing terms or existing leases can be struck out as unreasonable.”
Sir Peter, who said responsible freeholders had “nothing to fear” from the proposals, added: “It sounds as though the Government is going beyond what was in any party’s manifesto – this will be welcomed by everyone concerned for the wellbeing and welfare of leaseholders and there are more steps needed to make the dispute system work fairly and at very low cost.”
Mr Javid said the Government was looking at measures to help those recently sold leaseholds, as well as banning the practice in the future.
He told BBC Radio 4’s Today programme that a number of house-builders had set up compensation schemes, while he was also looking at ways people could seek redress from solicitors who did not spot the clause on leaseholds in their contracts.