Government to ban leaseholds on new-build houses

Sales of new-build houses as leasehold will be banned in England, Communities Secretary Sajid Javid has confirmed as the Government outlined its response to the leasehold reform consultation this morning.

Javid said legislation will be introduced to prevent the sale of new-build leasehold houses except where necessary such as shared ownership and where homes have shared services or are built on land with specific restrictions.

The Communities Secretary will be writing to all developers to “strongly discourage” the use of Help to Buy equity loans for the purchase of leasehold houses in advance of legislation and to ask those who have customers with onerous ground rent terms to provide necessary redress.

The Government said it would also introduce measures to ensure that ground rents on new long leases – for both houses and flats – are set at zero.

The Government said it would support existing leaseholders and make the process of purchasing a freehold or extending a lease much easier, faster and cheaper.

There will also be measures to provide leaseholders with support on the various routes to redress available to them, but it is unclear at this early stage if this would apply to existing leasehold owners faced with spiralling costs.

Javid said there were more than 6,000 responses to the consultation.

The key measures to be taken are:
– Legislating to prevent the sale of new-build leasehold houses except where necessary such as shared ownership.

– Making certain that ground rents on new long leases – for both houses and flats – are set at zero.

– Working with the Law Commission to support existing leaseholders and make the process of purchasing a freehold or extending a lease much easier, faster and cheaper.

– Providing leaseholders with clear support on the various routes to redress available to them.

– A wider internal review of the support and advice to leaseholders to make sure it is fit for purpose in this new legislative and regulatory environment.

– Making sure freeholders have equivalent rights to leaseholders to challenge unfair service charges.

He said: “It’s unacceptable for home buyers to be exploited through unnecessary leaseholds, unjustifiable charges and onerous ground rent terms.

“It’s clear from the overwhelming response from the public that real action is needed to end these feudal practices. That’s why the measures this Government is now putting in place will help create a system that actually works for consumers.”

Commenting on the Government response, Sebastian O’Kelly, of the Leasehold Knowledge Partnership, said: “Ending leasehold houses and setting new ground rents to zero are excellent first steps to stopping developers from turning ordinary people’s homes into highly complex investment vehicles for shady and anonymous investors, often based offshore.

“Sadly, there are 5m existing leasehold properties out there, all with widely differing lease terms and with ample opportunity for remunerative game playing at home owners’ expense.

“There is plenty of wriggle room here as the issue is referred to the Law Commission, where doubtless the sector and its grisly trade bodies will have their baleful influence.”

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2 Comments

  1. GeorgeHammond78

    Sounds like a few easy dodges in what’s being proposed – developers will just not bother having the roads adopted leaving the land with ‘specific restrictions’. More value for them when they sell the ground rents onto buyers of such portfolios as they’ll have management rights attached.

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  2. Will

    Why is our supposedly wise Government not insisting that all leasehold property has a minimum term of 999 years and that a seperate freehold company is formed with all leaseholders being shareholders. Mandatory transfer of  company shares to the new leaseholders when sales occur.  This would resolve a lot of the problems and arguments and alleviate the problem of some of the less professional freeholders.

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