Property News

Government to Crack Down on Leaseholds for New Build Houses

Rose Jinks - October 16, 2018

The Government has announced that it will crack down on leaseholds for new build houses, guaranteeing that almost all new build houses will have to be sold as freehold, while ground rents will be capped at just £10 a year.

The Government made the announcement at the weekend, and the Communities Secretary, James Brokenshire MP, launched a new consultation on the plans yesterday.

According to Government statistics, leaseholders currently pay an average of more than £300 ground rent per year, with some paying up to £700.

There was no suggestion that the move will be retrospective, indicating that some recent homebuyers could still find their properties difficult to sell.

Government to Crack Down on Leaseholds for New Build Houses

Government to Crack Down on Leaseholds for New Build Houses

Brokenshire said: “Unfair ground rents can turn a homeowner’s dream into a nightmare by hitting them in the back pocket, and making their property harder to sell.

“That’s why I’m taking concrete action to protect homeowners and end those unscrupulous leasehold practices that can cost tenants hundreds of pounds.

“While leasehold generally applies to flats with shared spaces, a number of developers have been increasingly selling houses on these terms, placing further financial burdens on those looking to buy a house of their own through unnecessary surcharges like ground rent.

“This can also mean that selling their home is more expensive and take longer than selling a freehold property.

“Under the Government’s proposals, which are subject to consultation, the majority of new houses will be sold as freehold, and future ground rents will be reduced to a nominal sum.

“The consultation will also seek views on what are the appropriate and fair exemptions, such as shared ownership properties and community-led housing to ensure consumers’ best interests are at the heart of the property market.”

The announcement also made reference to the Tenant Fees Bill, saying that the new crackdown on leaseholds “builds on action under way to make the property market fairer, including a crackdown on rogue landlords and ending unfair charges for tenants”.

The consultation will now run for six weeks. Estate agents have been invited to comment.

The Chief Executive of NAEA Propertymark (the National Association of Estate Agents), Mark Hayward, responds to the announcement: “Thousands of homeowners across the country are facing escalating ground rents, charges for making alterations to their properties and unable to sell their home. Therefore, it’s only right the Government looks to crack down on unfair leasehold practices, to stop even more people feeling trapped in homes they cannot afford to continue living in.

“Our recent Leasehold: A Life Sentence? report found almost half (45%) of leasehold houseowners didn’t know they were only buying the lease until it was too late, two thirds (62%) feel they were mis-sold and the vast majority (94%) regret buying a leasehold. This shows that, for too long, housebuilders and developers have not been transparent enough about what it actually means to buy a leasehold property.”

He adds: “However, this announcement is only good news for those looking to buy a leasehold property in the future. With 4.2m leasehold properties in England, many will remain stuck in their lease with no straightforward way out and the industry needs to help them.”