Victory over leasehold rip-offs on new homes Thousands trapped in homes they can’t sell April 8 Lawyers could face £500m bill over leasehold scandal April 22
Ministers to ban ‘feudal’ tactics after Mail campaign
RIp-OFF leasehold deals on new homes are to be banned in a major victory for the Mail.
Communities Secretary Sajid Javid last night unveiled plans for laws to stop the ‘feudal’ practice.
Legislation could also help families who have already bought homes under such ‘toxic’ deals.
Leaseholds, usually attached to flats, are being used by some of the biggest builders of new homes. The practice exposes households to rises in ground rents.
Under the plans, a cap will protect up to a million homes from the risk of ‘unreasonable and onerous’ increases in charges. There will also be a crackdown on the sale of leasehold homes through the Government’s help to Buy scheme.
and Mr Javid wants to help those buying new flats on leasehold deals. Ground rents could be set to ‘peppercorn’ rates in future, he said.
praising the Daily Mail for exposing ‘unfair’ practices, he said developers had been given a chance but had failed to change their ways.
The minister added: ‘you have published some very helpful stories about how people have been at the rough end of this. That’s why we’re taking action because we’ve got to put an end to that.’ Our investigations have exposed dozens of cases of families who found they were living under the shadow of a ‘toxic’ leasehold.
Mr Javid said the cases he had seen showed Britons were ‘frankly being ripped off ’ and many wouldn’t know what was ‘lurking in the small print’.
‘Far too many new houses are being built and sold as leaseholds, exploiting buyers with unfair agreements and spiralling ground rents,’ he added. ‘ Enough is enough. These practices are unjust, unnecessary and need to stop.’
Mr Javid pointed to examples where ground rents were doubling every year. In one case, in Bolton, he said charges on a £200,000 property were expected to hit £10,000 every year by 2050.
‘The industry has had some time to respond to this and it hasn’t properly responded – particularly in the north west of England,’ he said. ‘Now the Gov- ernment has to crack down on these unfair practices.’
Officials hope the measures, which are subject to an eight-week consultation, will be in force by early next year. The proposals aim to make leases fairer by reducing ground rents so that they ‘relate to real costs incurred’.
In 1996 just 22 per cent of new builds were leasehold. But by 2015 the proportion had risen to 43 per cent. Leaseholders have a legal right to occupy and use the prop- erty for a set period, typically from 99 to 999 years.
But they are also required to pay fees to the freeholder, who retains legal ownership of the ground on which the property is built.
Many leases see ground rents rise in line with inflation, but some include a clause that doubles the fee every decade, hammering family finances and drastically reducing the value of the property.
Some owners have been refused mortgages in new properties as a result, leaving them trapped.
Lenders can reject loan applications where leases are too short or ground rents too high.
Developers often sell the contracts on to investors who can demand huge sums when families want to buy the freehold. The scandal has been dubbed ‘the ppI of the housebuilding industry’.
Sir peter Bottomley, of the parliamentary group on leasehold reform, said existing unfair leases could be ‘struck out as unreasonable’.
1 in 7 Help to Buy owners locked into leaseholds From the Mail, April 1