Communities Secretary Sajid Javid has announced new measures to cut out unfair and abusive practices within the leasehold system, including a ban on leaseholds for almost all new build houses.
This comes as part of government action to deliver a fairer, more transparent system for homeowners to help fix the broken housing market and build a Britain fit for the future.
Changes will also be made so that ground rents on new long leases – for both houses and flats – are set to zero.
The government will also make it cheaper and easier for existing leaseholders to buy-out their freehold and there will be better information available about redress for those consumers who face the most onerous terms.
These measures follow a recent consultation where there was an overwhelming response in favour of government plans to tackle the unfair practices in the leasehold sector.
With 1.4 million leasehold houses across England and the number of leasehold sales rapidly growing, the government is taking crucial action to make the leasehold market fairer.
Leasehold generally applies to flats with shared spaces, making multiple ownership more straightforward, but developers have been increasingly selling houses on these terms – adding further costs to over-stretched house buyers.
Communities Secretary, Sajid Javid said:
It’s unacceptable for home buyers to be exploited through unnecessary leaseholds, unjustifiable charges and onerous ground rent terms.
It’s clear from the overwhelming response from the public that real action is needed to end these feudal practices. That’s why the measures this government is now putting in place will help create a system that actually works for consumers.
Measures to be introduced include:
- legislating to prevent the sale of new build leasehold houses except where necessary such as shared ownership
- making certain that ground rents on new long leases – for both houses and flats – are set at zero
- working with the Law Commission to support existing leaseholders and make the process of purchasing a freehold or extending a lease much easier, faster and cheaper
- providing leaseholders with clear support on the various routes to redress available to them
- a wider internal review of the support and advice to leaseholders to make sure it is fit for purpose in this new legislative and regulatory environment
- making sure freeholders have equivalent rights to leaseholders to challenge unfair service charges
These latest measures follow the government setting out plans in the housing white paper to fix the broken housing market, including making sure councils release more land for housing, building the right homes in the right places and improving affordability and protections for renters and home purchasers.
These measures relate to England only.
Over 6,000 responses were submitted to the recent government consultation on leasehold practices. The vast majority of responses expressed their concerns about the buying experience and living in a leasehold property. This highlights how the current system is clearly not working in the best interest of those living in or purchasing a leasehold home.
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.
We will also be continuing to discuss the case for limited exemptions with industry.
The Communities Secretary will be writing to all developers to strongly discourage the use of Help to Buy Equity loans for the purchase of leasehold houses in advance of legislation and to ask those who have customers with onerous ground rent terms to provide necessary redress.
Department for Communities and Local Government statistics estimate there were 4.2 million residential leasehold dwellings in England in the private sector in 2015 to 2016 and of these 1.4 million were leasehold houses. This was a rise on the previous year when in 2014 to 2015, there were 1.2 million leasehold houses.