House builders are to be banned from selling newbuild properties on a leasehold basis, except in certain circumstances. The government is to introduce legislation to outlaw the practice, which Communities Secretary Sajid Javid described as “feudal”.
In leasehold, the home owner doesn’t own the land on which the property stands. Instead they negotiate a time-limited lease with the freeholder, usually but not always lasting for decades.
Leasehold properties come with an annual ground rent attached, which the freeholder can double every decade, making leasehold an attractive option for bringing in guaranteed income over a long period of time.
Leaseholders usually also have to pay a management fee where there are shared services or maintenance, such as in blocks of flats.
Home buyers being ‘exploited’
Following a short consultation in late 2017, the Department for Communities and Local Government said legislation will be brought forward that prevents construction companies selling newbuild homes with a leasehold attached. The only exceptions will be for shared properties or where there are land restrictions attached to development.
The changes will apply only in England.
Confirming the ban, Mr 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.”