The government will ban leaseholds for almost all new build homes as part of new measures to tackle leaseholder exploitation, communities secretary Sajid Javid announced today.
Mr Javid said the government had received an “overwhelming response” from the public demanding intervention during a consultation on leasehold practices launched in the summer.
The ban will prevent the sale of new build houses on a leasehold basis, except where necessary – such as in shared ownership homes and where properties have shared services or are built on land with specific restrictions.
There are currently 1.4 million leasehold houses across England and the number of leasehold sales are rapidly growing.
The government has been under pressure to act since revelations in The Guardian last year that some contracts exploit leaseholders through exponential increases in ground rents.
The new measures announced today also include changes to ensure that ground rents on new long leases, for both houses and flats, are set to zero.
Leaseholders, unlike freeholders, do not own their homes outright, and often pay an annual rent to the freeholder, known as ground rent.
The government said it 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.
Announcing these new measures, Mr 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.”
Paul Smee, director of mortgages at UK Finance, welcomed the measures. “We support the Department for Communities and Local Government’s efforts to address the onerous and potentially unfair issues surrounding the leasehold system,” he said.
Louie Burns, managing director of Leasehold Solutions, also welcomed the measures but described them as “incredibly weak” and said they would create a “two-tier market”.
“New build properties with zero ground rents will become more attractive, while existing leaseholders will have less chance to sell their homes, as ground rents will still apply to their properties,” he said.
The key measures to be introduced are: