Government confirms plans to ‘derail’ national scandal of new-build leaseholds

News Article

The Government has announced plans to outlaw spiralling leasehold fees on new build properties.

The practice, which MPs have dubbed as both ‘a national scandal’ and the ‘PPI of the housebuilding industry’ will soon be outlawed.

Launching a consultation to tackle the problem, Communities Secretary, Sajid Javid, has outlined plans to not only ban the practice but also reduce ground rents to virtually nothing.

Although the majority of apartments are sold as leaseholds, allowing the owner of the building to fund maintenance, in recent years developers have increasingly been selling houses on a leasehold rather than freehold basis.

Unwitting buyers, who have not been fully aware of the implications, are often faced with escalating ground rents, with some unfortunate homeowners paying up to £10,000 a year.

In an article for The Times, Mr Javid describes the current situation as “feudal”. By 2015, leasehold properties had increased to 43 per cent of all new-build registrations in England and Wales, compared with just 22 per cent in 1996.

Mr Javid wrote: “We’re seeing more and more cases, particularly in the north of England, where developers are selling newly built standalone houses on a leasehold basis for no good reason. Worse still, they’re using the ground rent as an entirely unjustifiable licence to print money.”

The Communities Secretary highlighted the case of a £200,000 family home in Bolton that has become “unsellable” because the ground rent will rise by more than 3,000 per cent to almost £10,000 a year by 2060.

He continued: “Enough is enough. If housebuilders aren’t prepared to step off the ground rent gravy train, I’ll derail it for them.”

It is expected that Ministers will also attempt to ban leasehold homes from being purchased using government-backed Help- to-Buy loans and allow only nominal ground rents to be charged on all new leasehold properties.

There are also plans to change the law so that existing leaseholders who have fallen into arrears with ground rent fees, are not faced with eviction.

Nicola Tubbs, an Associate Executive and conveyancing expert with Palmers said: “This is very welcome news for homebuyers. We have previously highlighted instances of widespread dodgy leasehold deals and it is encouraging to hear that the Government intends to stamp out this dodgy practice.

“House-buying is one of the most stressful purchases people make so we hope that the reforms outlined by the Communities Secretary will soon be implemented to make the house buying process both transparent and fair.

“In the meantime, it is important to note that, as a leaseholder, you are legally entitled to buy your freehold after two years and if you and the freehold owner cannot agree a price, a tribunal will decide how much you should pay.”

For support on all aspects of conveyancing and advice on leasehold agreements, please contact us