Prospective new-build homebuyers will be relieved to hear that the government intends to crack down on unfair leasehold practices.
James Brokenshire, the communities secretary, has announced proposals to cap new leases to just £10.
The government also says the majority of new-build properties will be built freehold instead of with leases, an increasingly-criticised practice, seen as unfair on buyers of new-build properties in particular.
When you buy a home you buy either the freehold or the leasehold. The freehold means you own the property and the land on which it sits. Leasehold means you own the property and effectively rent the underlying land, generally for decades or even centuries. Until recently houses were generally sold freehold, while flats are more commonly sold leasehold.
But over recent years developers have started to sell new-build housing as leasehold, and profiting by selling the leasehold to someone else. Homeowners often don't realise the implications of buying leasehold instead of freehold, which can include paying escalating ground rent or having to ask the freeholder permission to make modifications to their home.
Ground rent costs the average leaseholder more than £300, with some paying as much as £700 per year. Not only is this costly for owners, but it makes selling the property on more difficult too.
Mr Brokenshire, secretary of state for communities, comments: “Unfair ground rents can turn a homeowner’s dream into a nightmare by hitting them in the back pocket, and making their property harder to sell.
“That’s why I’m taking concrete action to protect homeowners and end those unscrupulous leasehold practices that can cost tenants hundreds of pounds.”
Only good news for some
However, the new rules are as of yet just proposals, set for consultation. The government will seek views on appropriate exemptions.
Commenting on the announcement, Mark Hayward, chief executive of NAEA Propertymark, the main association for estate agents says: “Thousands of homeowners across the country are facing escalating ground rents, charges for making alterations to their properties and unable to sell their home.
“Therefore, it’s only right the government looks to crackdown on unfair leasehold practices to stop even more people feeling trapped in homes they cannot afford to continue living in.
“For too long, housebuilders and developers have not been transparent enough about what it actually means to buy a leasehold property.”
However, Mr Hayward caveats the good news with a reminder that this proposal only benefits new homeowners: “This announcement is only good news for those looking to buy a leasehold property in the future. With 4.2 million leasehold properties in England, many will remain stuck in their lease with no straight forward way out and the industry needs to help them.”