Government Bans Leaseholds On New-Build Houses In England

The government has confirmed it will ban the sale of new-build properties on a leasehold basis.

The move, first announced in July, aims to avoid buyers being locked into potentially ruinous obligations to pay rising ground rents for decades to come.

Sajid Javid, the communities secretary, said developers will have to cut ground rents to zero for all new apartments and houses.

The government will write to all developers that have sold homes with “onerous ground rent terms” to ask them to provide necessary redress.

Campaigners have been calling for the exploitative practices of freeholders to be banned over the past year


Taylor Woodrow has set aside £130 million to assist leasehold buyers but other developers have refused to pay any form of compensation.

Javid said: “It’s unacceptable for homebuyers 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.”

Property experts predicted some leaseholders could save nearly 50% on the punitive sums many are forced to pay once a flat’s lease drops below 60 years.

In one example, a £200,000 flat with 50 years left on the lease would be charged around £36,000 to extend under the current system but only £20,000 under the new approach.

Some terms mean ground rents double every decade


According to the Guardian, Gavin Barwell, a former housing minister but now chief of staff to Theresa May, has been the driving force behind the reforms.

It comes as housebuilder Redrow was criticised for misleading prospective buyers over the legal status of their homes.

Residents at one of its estates in Lancashire raised the alarm over advertising that claimed houses were freehold when they were not.

Signs on Redrow’s estate near Preston, Lancashire said: “Welcome to Ricksby Grange – where our homes are freehold”.

Residents including Joy and Lee Dickinson, who want to buy their freehold from Redrow, soon spotted the sign.

“I actually wondered whether Redrow were considering gifting the freeholds to us,” Mrs Dickinson told the Telegraph. “But the sign was ripped down two days later so I guess that’s not going to happen.”

Redrow is one of the largest housebuilders in Britain
Source: Wikimedia


A spokesman for Redrow admitted its mistake and confirmed that all the houses on the estate are leasehold. Since Ricksby Grange was built, Redrow has ceased selling leasehold houses.

The firm said: “We are working through a transition period and liaising directly with customers. We’ve written to existing customers, where we still own the freehold, to offer them the opportunity to purchase it on reasonable terms.”

Campaigners welcomed the reforms but remain concerned about when they will come into force. Sebastian O’Kelly of Leasehold Knowledge Partnership called it “a huge vindication of our efforts”.

However he warned: “There is plenty of wriggle room here as the issue is referred to the Law Commission, where doubtless the sector and its grisly trade bodies will have their baleful influence.”

It is hoped the ban will stop excess fees and charges earned by freeholders, solicitors and surveyors
Source: Creative Commons Images


Government officials promised that the new rules, including a new formula for calculating leasehold buyouts, will be in place by the end of 2018.

There are thought to be 1.2 million leasehold houses in England.

DealMakerz thinks the change can’t come quickly enough. There are shocking stories about homebuyers buying new-build homes on 999 year leases and being trapped in spiralling ground rents that double every 10 years.

The freehold is often sold on to specialist companies who demand huge sums of money if the homeowner wants to buy their way out.

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