UK

Leaseholds On New Builds Could Be Banned Under Government Plans To Protect Homeowners

It's time to stop 'unjust' and 'unnecessary' practices.

25/07/2017 16:21 BST
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Leaseholds could be banned on new builds in England under new government rules 

Leaseholds on new-build houses could be banned and ground rents slashed to zero under government proposals to protect homeowners

Under the current system, buyers can face exorbitant costs and properties can be rendered unsellable because of leasehold fees. 

But Sajid Javid - who has previously described the leasehold system as “practically feudal” - has put forward plans in attempt to stop “unjust” and “unnecessary” practices. 

The communities secretary wants to restrict ground rents to zero and prohibit future houses being sold as leasehold in England, the Press Association reported. 

There has been a rise in developers selling houses under terms which usually apply to flats, particularly in the North West. 

The proposals, which are subject to an eight-week consultation, aim to make future leases fairer by reducing ground rents so they “relate to real costs incurred”.

The plans include measures to close legal loopholes to protect leaseholders who can be left vulnerable to possession orders, as well as changing the rules on Help to Buy equity loans so they can only be used for “new built houses on acceptable terms”.

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Communities secretary Sajid Javid said homeowners are being exploited under the current system 

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.” 

More than four million people live in leasehold properties in England - around a quarter of which were leasehold houses, according to the Department for Communities and Local Government.

They have a legal right to occupy and use the property for a set period, typically from 99 to 999 years, with certain conditions set out in the lease.

Leaseholders pay fees to the freeholder who retains legal ownership of the ground on which the leaseholder’s home is built.

Sir Peter Bottomley, co-chair of the all-party parliamentary group on leasehold reform, welcomed the crackdown but said action should be taken to help those with unfair existing leases.

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Around a million people live in leasehold houses, according to government figures 

The Conservative MP told the Press Association: “Having control and hopefully abolition of unjustified and unnecessary fees, which would apply to existing leasehold as well as future ones, then I would argue that if not covered by existing law, there should be action taken by Parliament so that unfair existing terms or existing leases can be struck out as unreasonable.”

Bottomley, who said responsible freeholders had “nothing to fear” from the proposals, added: “It sounds as though the government is going beyond what was in any party’s manifesto - this will be welcomed by everyone concerned for the wellbeing and welfare of leaseholders and there are more steps needed to make the dispute system work fairly and at very low cost.”

Javid said the government was looking at measures to help those recently sold leaseholds, as well as banning the practice in the future.

He told BBC Radio 4’s Today programme that a number of house-builders had set up compensation schemes, while he was also looking at ways people could seek redress from solicitors who did not spot the clause on leaseholds in their contracts.