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Government proposes axing leasehold for all new houses


In what the Government deemed a 'bold move' to tackle unfair leasehold practices, it has announced that all new-build homes will be sold as freehold.

In a recent speech given at a conference for the Chartered Institute of Housing, the Communities Secretary, James Brokenshire MP, confirmed plans to eliminate the sale of new houses as leasehold properties, thereby preventing future homeowners from becoming trapped in exploitative arrangements. The Secretary also announced the intention to reduce ground rents for new leases to zero. This will prevent leaseholders being charged soaring fees.

The problem with leaseholds

Over the past decade or so, housebuilders have sold new build houses as leaseholds for no reason other than to create a future income stream. The worst leases have ground rents which double every ten years – making the properties very difficult to sell or re-mortgage. Some leaseholders, attempting to buy their freehold at a later date, after being told this was possible by developers’ sales staff, only to find that the freehold to their home has been sold to an investor drawn by the profitable revenue provided by ground rent.

Both the National Leasehold Campaign and Leasehold Knowledge Partnership have battled to get the rules changed and hold developers accountable for their activities.

New measures

The new rules will provide leaseholders with the information they need to sell their home and introduce a new time limit of 15 working days and a maximum fee of £200 to make the home buying process quicker, cheaper and easier to do.

Homes England has been directed to renegotiate Help to Buy contracts to explicitly rule out the selling of new leasehold houses. If buyers are wrongly sold a leasehold home, which would leave them burdened with a property that could be hard to sell in the future, they will be able to get their freehold outright and at no extra cost.

“[The Government has] long recognised that we have a responsibility to confront unfairness in the leasehold market…we are committed to taking bold action to reform the sector and will be pressing ahead as soon as parliamentary time allows…” James Brokenshire MP said at the conference.

Response to the changes

Response from homeowners’ groups was generally positive. Paula Higgins, Chief Executive of HomeOwners Alliance welcomed the new measures and the better protection for those buying new homes. However, as she also pointed out in her statement, “these measures will do little to help existing leaseholders living a nightmare with their mental wellbeing badly affected.”

Joanne Darbyshire of the National Lease Campaign agreed, saying “Today’s announcement is brilliant news for future home buyers and ramps up the pressure to ensure those of us already caught up in this leasehold scandal are given proper financial redress”.

And the new proposals have already had a big impact on the housing market, with the sale of leasehold housing falling from 11 percent to just two percent this year.

Other proposals

Further proposals have also been unveiled, including making it easier for renters to transfer deposits directly between landlords when moving. Extra funding will also be made available to create 19 new garden villages, with the potential to deliver 73,554 new homes. New measures to speed up planning applications have also been announced.

If you have any question about this blog, please contact our Property Litigation Team.

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