Government to crack down on ‘unfair’ leasehold practices

“It’s clear from the overwhelming response from the public that real action is needed to end these feudal practices.”

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Government is ready to back a ban on leaseholds for almost all new-build houses.

The ban is included in a range of measures to be announced by communities secretary, Sajid Javid, to cut out ‘unfair and abusive’ practices within the leasehold system.

Changes will also be made so that ground rents on new long leases – for both houses and flats – are set to zero.

Government also intends to make it ‘cheaper and easier’ for existing leaseholders to buy-out their freehold – with the offer of ‘better information’ about redress for those consumers who face the most onerous terms.

These measures follow a recent consultation where there was an overwhelming response in favour of government plans to tackle the unfair practices in the leasehold sector.

With 1.4 million leasehold houses across England and the number of leasehold sales rapidly growing, the government is taking crucial action to make the leasehold market fairer.

Leasehold generally applies to flats with shared spaces, making multiple ownership more straightforward, but developers have been increasingly selling houses on these terms – adding further costs to over-stretched house buyers. 

Javid said: “It’s clear from the overwhelming response from the public that real action is needed to end these feudal practices.”

Measures to be introduced include:

  • Legislating to prevent the sale of new build leasehold houses except where necessary such as shared ownership
  • Making certain that ground rents on new long leases – for both houses and flats – are set at zero
  • Working with the Law Commission to support existing leaseholders and make the process of purchasing a freehold or extending a lease much easier, faster and cheaper
  • Providing leaseholders with clear support on the various routes to redress available to them
  • A wider internal review of the support and advice to leaseholders to make sure it is fit for purpose in this new legislative and regulatory environment
  • Making sure freeholders have equivalent rights to leaseholders to challenge unfair service charges.

The measures relate to England only.

Over 6,000 responses were submitted to the recent government consultation on leasehold practices, the vast majority expressed concerns about the buying experience and living in a leasehold property.

The proposed prohibiting of future houses being sold as leasehold will apply to all houses apart from a few exceptional circumstances where leasehold is still needed – such as houses that have shared services or built on land with specific restrictions.

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