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Leasehold axed for new houses

Emma Lunn
Written By:
Emma Lunn

The government has banned the sale of new build houses as leasehold and capped ground rents on new leases at £0.

The government has confirmed plans to abolish the selling of new houses as leasehold properties and reduce ground rents for new leases to zero.

Communities secretary James Brokenshire MP announced the move in a speech to the Chartered Institute of Housing conference in Manchester.

Under new rules, all new houses are to be sold on a freehold basis unless there are exceptional circumstances – ending the unscrupulous practice of unnecessary leaseholds. Where a lease is granted (on a flat, for example), the ground rent will be set to zero, preventing leaseholders being charged soaring fees for which they receive no benefit.

The past decade or so has seen housebuilders sell new build houses as leaseholds for no reason other than a future income stream. The worst leases have ground rents which double every 10 years – these properties have become very difficult to sell or remortgage.

Where leaseholders have attempt to buy their freehold at a later date – after being promised this was possible by developers’ sales staff – they have routinely found the freehold to their home has been sold to an investor attracted by the lucrative income stream provided by ground rent.

The National Leasehold Campaign and Leasehold Knowledge Partnership have both waged campaigns to get the rules changed and developers held accountable for their actions.

Help to Buy leasehold ban on houses and a cap on sales fees

The new rules will also see immediate action to ban Help to Buy being used to support leasehold houses and a cap on fees for management information when a leasehold property is sold.

Currently when leaseholders sell their home, freeholders and managing agents have free reign to charge high fees for information vital to the sale. But these fees will be capped at £200 and a time limit of 15 working days to provide the information introduced.

Where buyers are incorrectly sold a leasehold home – saddling them with a property that could ultimately prove difficult to sell – consumers will be able to get their freehold outright at no extra cost.

Brokenshire said: “We have long recognised that we have a responsibility to confront unfairness in the leasehold market. Last year we consulted on proposals including the leasehold house ban and ground rent reduction.

“Today I can confirm we will go ahead with our original plan to reduce ground rents on future leases to zero, as opposed to a cap of £10 per year. And we will legislate to ensure that in the future – save for the most exceptional circumstances – all new house will be sold on a freehold basis.

“We are committed to taking bold action to reform the sector and will be pressing ahead as soon as parliamentary time allows – helping us delivery our promise to make the home buying and selling process quicker, cheaper and easier.”

The Competition and Markets Authority launched an investigation into mis-selling in the leasehold sector earlier this month.