Government plans to ban leasehold sales of new houses

The government has announced plans to clampdown on unfair practices involving leasehold sales on new homes.

The measures include a ban on new build houses being sold as leaseholds as well as restricting ground rents to as low as zero.

Leaseholds generally apply to flats with shared spaces, but increasingly, developers have been selling houses on these terms.

Ministers say change is needed because the terms of some leases are becoming increasingly onerous to those purchasing a leasehold flat or house. For example, some people have been told they need to pay thousands of pounds to their freeholder to make simple changes to their homes.

Recent cases include:

  • a homeowner being charged £1,500 by the company to make a small alteration to their home
  • a family house that is now unsaleable because the ground rent is expected to hit £10,000 a year by 2060
  • a homeowner who was told buying the lease would cost £2,000 but the bill came to £40,000.

Communities Secretary, Sajid Javid said: “It’s clear that far too many new houses are being built and sold as leaseholds, exploiting home buyers with unfair agreements and spiralling 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.”

Other measures, which are now subject to an 8-week public consultation, include:

  • setting ground rents to zero levels – in recent years these have increased significantly, in some cases doubling every 10 years
  • protecting people by closing legal loopholes– such as leaving some leaseholders vulnerable to possession orders
  • changing the rules on Help to Buy equity loans so that the scheme can only be used to support new build houses on acceptable terms.

We shall keep clients informed of developments.

Please contact us if you would like advice about the legal aspects of buying or selling a home.