Leaseholds on new-build homes set to be outlawed
Developers are set to be banned from selling new-build houses with leases that end up costing families a fortune.
Ministers are drawing up plans to outlaw the ‘ feudal’ practices of builders who sell new houses with leases, forcing buyers to pay a yearly ground rent to the freeholder.
some of these fees can double every decade, crippling homeowners and making the property almost impossible to sell on.
The proposed clampdown came as government figures showed the true scale of the leasehold scandal blighting the lives of millions of families. A report by the Department for Communities and local Government (DClG) revealed that one in five private homes in england – four million in total – are leasehold.
While 2.8million of these are flats, which have traditionally been leasehold, there are now 1.2million houses that have leases, including 167,000 detached homes.
A DClG spokesman last night said a consultation on ending leaseholds for new houses has been launched.
‘ We will announce more details shortly,’ he said. ‘It’s unacceptable that homebuyers are being exploited with unfair charges and unfavourable ground rent agreements. We will take action to tackle all unfair and unreasonable abuses of leasehold.’
Theresa May has also pledged to tackle the problem, saying: ‘I do not see why new homes should not be built and sold with the freehold interest at the point of sale.’
Government sources said officials are looking at ending the use of leasehold for new developments of houses as well as setting a minimum lease length for new flats, ‘offering leaseholders greater security and saving them money over the long term’.
Communities secretary sajid Javid has already announced plans to clamp down on the sale of leasehold homes under the Government’s Help to Buy mortgage scheme.
More than 10,000 new leasehold houses have been sold through Help to Buy since it was launched four years ago.
It included nearly 5,000 last year alone, or one in seven of the houses in the taxpayerfunded project. But ministers are now looking at going even further and banning developers from selling leasehold houses on land they own, meaning buyers will be handed the freehold and own the property outright.
Traditionally, the vast majority of houses were freehold properties while flats were leasehold, but some of Britain’s biggest builders are selling an increasing number of brand new homes with leases.
In 1996 only 22 per cent of new builds were leasehold, but by 2015 this had increased to 43 per cent.
Many of these leases see ground rents rise in line with inflation. But some include a clause that doubles the fee every decade, hammering family finances and trashing the value of the property.
such an arrangement would see a ground rent that starts at £250 a year today rise to £500 a year in ten years, £1,000 a year in 20 years and £2,000 a year in 30 years. Unless a cap is put in place, in theory this ground rent would cost more than £8million a year after 150 years.
Developers often sell these contracts on to investors who can demand huge sums from families wanting to buy the freehold to their home.
leasehold homes have been dubbed ‘ the ppI of the housebuilding industry’ after the mis- selling of payment protection insurance by the banks.
paula Higgins, of the Homeowners Alliance campaign group, said: ‘leasehold is a ticking time bomb and millions of householders are in a precarious position. The leasehold system too often turns the dream of homeownership into a nightmare.’
The leasehold Knowledge partnership campaign group estimates building firms make £300million to £500million a year from the sale of ground rent agreements to investors.
1 in 7 Help to Buy owners are locked into leaseholds From Saturday’s Mail