Communities Secretary has set out plans to
ban new build houses being sold as leasehold as well as
restricting ground rents to as low as zero. This can
often expose homebuyers to unreasonable and long-term
financial abuse.
Leasehold generally applies to flats with shared spaces,
but developers – particularly in the north west - have
been increasingly selling houses on these terms.
With 1.2 million leasehold houses currently recorded in
England and the number of leasehold sales rapidly
growing, the government is taking crucial action to make
future leases fairer.
Communities Secretary, said:
It’s clear that far too many new houses are being built
and sold as leaseholds, exploiting home buyers with
unfair agreements and spiraling 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.
Other measures, which are now subject to an 8-week
consultation, include:
- setting ground rents to zero levels – in recent years
these have increased significantly, in some cases
doubling every 10 years
- closing legal loopholes to protect consumers – such
as leaving some leaseholders vulnerable to possession
orders
- changing the rules on Help to Buy equity loans so
that the scheme can only be used to support new build
houses on acceptable terms
The terms of some leases are becoming increasingly
onerous to those purchasing leasehold flat or house, who
often find they need to pay thousands of pounds to their
freeholder to make simple changes to their homes. Recent
cases include:
- a homeowner being charged £1,500 by the company to
make a small alteration to their home
- a family house that is now unsaleable because the
ground rent is expected to hit £10,000 a year by 2060
- a homeowner who was told buying the lease would cost
£2,000 but the bill came to £40,000
Ground rents are charged on all residential leasehold
properties but evidence shows that they are becoming
increasingly expensive. Under government plans they could
be reduced so that they relate to real costs incurred,
and are fair and transparent to the consumer.
The proposed prohibiting of future houses being sold as
leasehold will apply to all houses apart from a few
exceptional circumstances where leasehold is still needed
– such as houses that have shared services or built on
land with specific restrictions.
The consultation will
last for 8 weeks from Tuesday 25 July 2017.
We have also launched another consultation today
on proposed secondary legislation that recognises
residents’ associations, and their power to request
information about tenants.
These proposals relate to England only.
Department for Communities and Local
Government statistics estimate
there were 4 million residential leasehold dwellings in
England in the private sector in 2014 to 2015 and of
these 1.2 million were leasehold houses.
