Leaseholds banned on all new-build houses

28 June 2019
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All newly-built houses will be sold on a freehold rather than leasehold basis and ground rents on new leases will be reduced to zero, the government has announced.

The move is designed to tackle unfair leasehold practices that sting homeowners with what ministers have called "exploitative arrangements". 

However, the ban will not be applied retrospectively, and flats can still be sold as leasehold.

Under the plans, ground rents on future leases will be zero, down from the proposed cap of £10 per year.

There are currently four million leasehold properties in the UK, of which 1.4 million are houses.

Freeholders and managing agents will be given a new time limit of 15 working days and have a maximum fee limit of £200 to make the homebuying process quicker and cheaper.

Buyers incorrectly sold a leasehold home after the rules start will be able to buy their freehold outright at no extra cost and with no legal fees.

Housing secretary James Brokenshire says: “We have long recognised that we have a responsibility to confront unfairness in the leasehold market. Last year we consulted on proposals including the leasehold house ban and ground rent reduction.

“Today I can confirm we will go ahead with our original plan to reduce ground rents on future leases to zero, as opposed to a cap of £10 per year.

“And we will legislate to ensure that in the future – save for the most exceptional circumstances – all new houses will be sold on a freehold basis.”

There have been reports of tens of thousands of families being hit with huge rents after purchasing a leasehold property, leaving some trapped and unable to sell their homes.

The announcement comes after the Housing, Communities and Local Government Committee found that the current leasehold system is open to abuse by developers, freeholders and managing agents.

Leaseholders are often charged expensive ground rents as well as high service charges and one-off bills.

Ground rents have in some cases risen so high they have left properties unsellable and unmortgageable, while fees have been charged above the reasonable cost of administration.

The freeholder of a property owns the land outright, including the land it is built on. Most houses are freehold, but some are leasehold.

The difference with a leasehold property is that you own the property and its land for a fixed period of time depending on the agreement you have with the landlord – effectively making you a tenant.

Leaseholds usually last between 99 and 125 years, sometimes going up to 999 years.

The government has also instructed Homes England to ban the sale of leasehold homes on Help to Buy contracts other than in “exceptional circumstances”.

It is not clear when the new rules will come into force, with the government saying it “will be pressing ahead as soon as parliamentary time allows”.

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