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Government ban on new-build leaseholds

Tuesday 25 July 2017

The Government plans to put an end to the "leasehold scandal" by banning developers from selling new-build houses in England as leasehold.

Plans to ban the practice and reduce ground rent payments will be outlined in a consultation launched by the Communities Secretary, Sajid Javid.

Currently around 21 per cent of private housing in England is owned by leaseholders, with 30 per cent of those properties being houses rather than flats. And whilst the Government have confirmed that flats can continue to be sold as leasehold, ground rents will be restricted to a “peppercorn” level.

The consultation will seek views on prohibiting the sale of new build leasehold houses where the developer is not obliged to sell a house on a leasehold basis, restricting ground rent charges and tackling unreasonable rises. 

However, the future is still unclear for the existing 1.2 million leasehold homeowners. The DCLG is expected to consult on what it can do to support existing leaseholders with onerous charges, including tackling unreasonable rises, possible changes to the Help to Buy scheme in relation to leasehold houses and giving more powers to householders to fight unfair charges.

Taylor Wimpey announced earlier in the year that it had set up a £130 million assistance scheme to compensate homeowners, however other developers who have also been caught up in the controversial row have yet to come forward with a similar resolve.

Nationwide stopped lending against new build properties with terms of less than 125 years for flats and 250 years for houses in May, and has refused to lend on new builds with unreasonable ground rents – such as those doubling every five, 10 or 15 years.

Communities Secretary, Sajid 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.”

Louie Burns, Managing Director of Leasehold Solutions commented:

“The leasehold scandal is a very serious situation and goes deeper than new build leasehold houses. There are already thousands of flat owners caught up in leasehold properties paying extortionate ground rents and onerous service charges. Leasehold Solutions is now keen to see what the government's plans will be to help those already living a leasehold nightmare, and when legislation will change to help those people already trapped by leasehold.”

NAEA Propertymark Chief Executive, Mark Hayward said:

“We’re very pleased the Government has brought some clarity to this unsatisfactory situation; it draws attention to the onerous consequences of buying a property with escalating ground rent.”

Over the past nine months, NAEA Propertymark has highlighted the issues surrounding leasehold new-builds, and has vehemently supported the work of Leasehold Solutions, Leasehold Knowledge Partnership and the National Leasehold Campaign Facebook group.

The consultation, set to run for eight weeks, will close on 19 September 2017. NAEA Propertymark will be responding to the consultation, so please forward any comments to our Policy and Campaign's Office Timothy Douglas.