Legal News

Communities Secretary Sajid Javid has set out plans to prevent new build houses from being sold as leasehold, as well as restricting ground rents to as low as zero.

The charges attached to leasehold properties can often expose homebuyers to unreasonable and long-term financial abuse, says the government.

Radical new proposals to cut out unfair abuses of leasehold were announced by the government on Tuesday (25/07/17), in a major move that will deliver a fairer, more transparent system for homebuyers.

Leasehold generally applies to flats with shared spaces, but developers – particularly in the northwest of England – increasingly have been selling houses as leasehold.

There are 1.2 million leasehold houses currently recorded in England – and with the number of leasehold sales growing rapidly, the government says it is taking crucial action to make future leases fairer.

Communities Secretary Sajid Javid said:

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

Other measures – now subject to an eight-week consultation – include setting ground rents to zero levels. In recent years, these have increased significantly – in some cases, doubling every ten years.

There are also proposals to close legal loopholes to protect consumers – such as leaving some leaseholders vulnerable to possession orders – and 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 government says the terms of some leases are becoming increasingly onerous to those purchasing a leasehold flat or house, with homebuyers often finding 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 – and in another case, a family house is now unsaleable because the ground rent is expected to reach £10,000 per annum by 2060.

Another homeowner 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 which have shared services or are built on land with specific restrictions.

The consultation will last for eight weeks from Tuesday, 25 July 2017.

The government has also launched another consultation on proposed secondary legislation that recognises residents’ associations and their power to request information about tenants.

The proposals relate solely to England.

Duncan Lewis Housing Solicitors

Duncan Lewis Housing Solicitors can advise on a wide range of housing law, including advising developers and self builders on planning permissions and planning appeals.

There are Duncan Lewis offices across England and Wales and our housing team is also able to advise on: