Barwell: government will stamp out 'abuse' of leaseholder system

The housing minister attacked the practice of certain developers building leasehold homes solely as a form of “investment vehicle for financial institutions”.

Speaking at the Lease Annual Conference, Mr Barwell said reform of the leaseholder system would be included in the long-awaited Housing White Paper.

He cited cases where people buy a leasehold only to find the cost of purchasing the freehold is “too prohibitive”.

He added: “This isn’t a small issue, the Leasehold Knowledge Partnership estimates around 9,000 houses were built and sold last year as leasehold. Many of those seem to exist only to create an income stream from the ground rent or from selling the freehold.”

Mr Barwell said these practices are not illegal but there is a “gulf between the letter of the law and what our principles and morals tell us is actually right”.

In a debate in parliament last month, Mr Barwell said he would take action against these practices.

Some examples of treatment of leaseholders “represent truly appalling behaviour”, Mr Barwell said, and added it “isn’t just one company going rogue, a number of larger developers are involved in it”.

He added: “They would do very well to remember they are building homes for people to live in, not investment vehicles for financial institutions.”

Mr Barwell said except in a “very limited” set of circumstances he could not think of “any good reason for houses in this day and age to be built on a leasehold basis”.

The housing minister also attacked developers who sell a leasehold property and dramatically increase the ground rent.

He cited one “extreme” example of a leaseholder’s ground rent which started at £175 per year and was set to rise to £367m over 200 years “with a ground rent that doubles every decade”.