Q&A Is it legal to charge ground rent for a new-build house?
QI recently reserved a new house from a developer and it should complete in the spring. I particularly decided on a house as I am currently in a leasehold flat and the service charge and ground rent are extortionate. However, I have just heard the house is subject to ground rent charges. I am shocked to hear this and had no idea that a regular new-build house could be subject to such charges, is this legal?
AFor as long as I can remember new houses have always been freehold. True, there are a few that are maybe located within gated developments with luxury services such as a 24-hour concierge and leisure facilities that are naturally subject to these charges. But regular houses are not.
The Government however flagged a new trend of ground rent charging that seems to be fairly prevalent amongst new-build houses.
It recently announced that the majority of new-build houses would be sold as freeholds in a move to tackle unfair practice in the leasehold sector and bringing an end to unjustified selling of properties in this way. Ministers have promised to consult on a proposal that ground rents on new leases should be capped at £10. Unfair ground rents can turn a homeowner’s dream into a nightmare by hitting them with an unexpected charge.
Purchasing a home like this can also make it potentially difficult to sell the property in the future, given most buyers would also not want to be stuck with such charges.
Considering some leaseholders are now paying up to £700 per annum in ground rent this move is seriously needed.
Hopefully, given you are not completing on the property until the spring, by that time these new government rules should be in place and protect you from being subject to such charges.
The Government is taking this seriously and it looks like any hefty ground rent charges for houses will be short lived with a token £10 ground rent being introduced for new leases.
So even if you do find you are left with no choice but to pay them initially in all likelihood, this situation will change when the new legislation comes in and you’ll only be getting a bill for a reasonable amount.
That should also allay any future buyers’ concerns about the property when you come to sell.