Government plans to ban sale of new-build homes under leasehold

Jessica Nangle

July 25, 2017

The government has unveiled proposals to ban new-build houses being sold as leasehold in the hope of creating a fairer and more transparent system for prospective homebuyers.

Sajid Javid (pictured), communities secretary, has announced plans to ban the sale of new-build houses as leasehold and wants to restrict ground rents to zero.

Leasehold traditionally apply to flats with shared spaces, however recently it has been revealed that developers have been selling houses on leasehold terms.

Javid said: “It’s clear that far too many new houses are being built and sold as leaseholds, exploiting home buyers with unfair agreements 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.”

The measures also include closing legal loopholes to protect consumers who may be vulnerable to possession orders.

Beth Rudolf, director of delivery at The Conveyancing Association, added:“ We look forward to hearing more details on these proposals and hope they will deal with the single biggest loophole, the Commonhold and Leasehold Reform Act.

“This act currently excludes leasehold homeowners from having any protection from unreasonable fees and unreasonable delays when buying, selling or simply improving their property.

“We hope the government will consider the leasehold reform proposals submitted by the Legal Sector Group last month and, in the meantime, at the Conveyancing Association we will continue our work to find a better method of tenure for properties with shared amenities.”

The government highlighted recent cases which shows that often a homeowner is paying upwards of £1000 to their freeholder to make a small alteration to their home.

Under these planned measures, which are now subject to an eight week consultation, the hopes are that these costs will be reduced so that they can relate to real costs incurred.

Sarah Wilde, policy adviser at the Building Societies Association, said: “This action by government is very welcome.

“This is also a great opportunity to simplify the way that leasehold terms are written as currently they can be convoluted and difficult to understand.  We look forward to contributing to this consultation.”

Kate Faulkner, property analyst, said: “These are good changes.

“The worst part of the freehold/leasehold system is the developer selling the freehold to a third party.

“This was a recipe for disaster as leaseholders have little strength against freeholders.

“Developers should be taking better care of customers.”

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