The Government has unveiled plans to ban the sale of new-build leasehold homes under proposals to prevent homeowners paying unfair fees.
Under the new proposals, leaseholds on new-build homes would be illegal, while ground rents would also be reduced to zero.
Sajid Javid, the Communities Secretary, said: “It’s clear that far too many new houses are being built and sold as leaseholds, exploiting home buyers with unfair agreements and spiraling ground rents. Enough is enough. These practices are unjust, unnecessary and need to stop.
“Our proposed changes will help make sure leasehold works in the best interests of homebuyers now and in the future.”
The leasehold system generally applies to flats and apartments. Over four million people live in leasehold homes in England – a quarter which are houses.
Leaseholders do not own their homes outright and have to pay and annual ground rent to the freeholder who retains legal ownership of the ground the property is built on.
However, leasehold property owners can face exorbitant increases in fees and charges each year, costing them thousands of pounds.
The Government said that developers have been increasingly selling leasehold houses on these terms, particularly in the North West.
Some leaseholders are paying huge amounts of money just to make minor alterations to their home or have been hit by inflation busting rises in ground rents.
In one case a family house is now unsaleable because the ground rent is expected to hit £10,000 a year by 2060.
In another a homeowner who was told buying the lease would cost £2,000 but the bill came to £40,000
Anne Baxendale, from housing charity Shelter’s, said: “Our housebuilding system is failing families all over the country, many of whom are being stuck with ever increasing charges on expensive, and often second-rate, new homes.
“While the leasehold system can help make sure new homes are properly serviced, it’s clear it has been massively abused by developers who are using this to get something for nothing. Ground rent charges should be transparent and fair, and it’s vital that families hit by unjust charges are compensated.
“It’s good to see the government upholding commitments from their Housing White Paper, but it’s also important to remember this is only one small piece of the puzzle when it comes to our broken housing system. The only way we can put an end to this miserable housing crisis is for the government to get behind a different way of building homes, which puts the needs of families and communities first.”
Sarah Wilde, policy adviser at the Building Societies Association, said: “This action by Government is very welcome. In addition to banning onerous conditions like escalating ground rents in the future, we want to see action for those already in leasehold homes where the terms could be considered onerous.
“This is also a great opportunity to simplify the way that leasehold terms are written. Right now they can be very convoluted and difficult to understand. We look forward to contributing to this consultation.”
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