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Ban on selling new leasehold homes needs to cover those already trapped in “feudal” practice

Robin Bowman

Robin Bowman
Jan 22, 2018

Ban on leasehold rents needs to go further

The government acted last month to ban builders from selling leaseholds on almost all new homes.

The crackdown was on a practice that has been described as “feudal”, in which owners pay an increasing amount of ground rent every year to the owners of the lease. 

In some cases, these ground rents can double over 10 or 25 years, reaching thousands of pounds a year, making homes unsaleable.

The change was brought in to protect people from falling into the same trap as couples like Nathan and Tasha Stewart, whose case we report here. At the end of the couple’s 125-year lease, their ground rent will be £307,200.

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From the end of last month the government announced that ground rents on all new build  houses and flats will be set to zero.

New rules to make it easier for owners to buy freeholds are also to be introduced.

Communities secretary Sajid Javid said: “It’s unacceptable for home buyers to be exploited through unnecessary leaseholds, unjustifiable charges and onerous ground rent terms. 

“It’s clear from the overwhelming response from the public that real action is needed to end these feudal practices. That’s why the measures this Government is now putting in place will help create a system that actually works for consumers.”

The trouble is that the new legislation, while an excellent move to protect new-home buyers, doesn’t apply retrospectively to the 1.4 million house that currently have leasehold contracts in which the ground rent rises.

But there is some hope that changes may come to help people in this financial nightmare.

One of the big ground rent companies is Longharbour, and it is believed to be offering those people locked into leases where the ground rent doubles every few years a variation that will reduce this. 

Another company that has bought freeholds is the Consensus Business Group, which says on its website it has built up a portfolio of more than 300,000 residential freeholds worth over £4 billion.

New measures needed

Details of measures to help those already trapped by unjust leases have yet to be revealed, but everyone should check the terms of the lease of any property they buy, or better still ask a solicitor to check this specifically. 

And it must be made law that leaseholders should be able to buy out a lease easily and at a fair price to protect hundreds of thousands of homeowners from being unfairly landed with excessive charges.

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.

Measures introduced by the government 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
  • making sure freeholders have equivalent rights to leaseholders to challenge unfair service charges 

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