Minister: End ‘feudal’ rip-off of home leases

BUYERS should be protected from the ‘unjustifiable and unfair’ sale of thousands of leasehold homes, ministers said yesterday.

Communities Secretary Sajid Javid criticised the ‘practically feudal practices’ of developers who build new houses and sell them as leasehold, forcing buyers to pay a yearly ground rent.

He is now planning a clampdown on the sale of such homes under the Government’s Help to Buy scheme, which offers support to first-time buyers struggling to get on the housing ladder.

Under the plans, developers could be banned from selling a leasehold house to a buyer using the taxpayer- backed mortgage scheme.

Buyers of leasehold homes do not own the property outright, and have to pay an annual fee to the developer or whoever owns the freehold.

Some of these ground rents double every decade, meaning that a fee starting at £250 today would be £500 in ten years, £1,000 in 20 years and £2,000 Unless in a 30 cap years.is put in place, in theory this ground rent would cost more than £1million a year at the end of a typical 125-year lease, critics said. Developerson to wealthy often investorsflog freeholdswho are attracted by the lucrative income stream. Families can attempt to buy the freehold, but the owner may then hold them to ransom by demanding a huge premium. The spiralling cost of owning a leasehold home can leave some families struggling to make ends meet.

And even if they decide to sell up, the very existence of the punishing ground rent – and the cost of purchasing the freehold – makes it difficult or even impossible to find a buyer.

The crisis has sparked a fierce backlash from campaigners, who have warned some families are stuck in their homes.

Mr Javid said: ‘The last thing I want to do is tie the industry up in more red tape at a time when supply is already so far short of demand.

‘ But as a Government committed to building a fairer society, I don’t see how we can look the other way while these practically feudal practices persist.

‘ So I will look to ensure Help to Buy equity loans are only used to support new build houses on acceptable terms.’ Traditionally, the majority of houses were freehold properties while flats were leasehold – with the owner responsible for maintaining shared spaces.

But builders have been selling leasehold houses in recent years as they look to turn a profit, first through the initial sale and then by offloading the freehold to an investor.

Mr Javid said he had heard ‘all kinds of horror stories’, including homeowners told they could buy their lease for 30 times the ground rent, ‘only to discover the freehold has been sold to a third party who won’t give it up for less than 100 times the ground rent’.

‘All kinds of horror stories’