Leasehold ban for new builds

The government this week announced plans to ban leasehold on future new-build homes, and cut ground rents on new flats to as low as zero.  Flats can be continued to be sold as leasehold, but ground rents will be restricted.

New legislation will close legal loopholes to protect buyers, some of whom have faced repossession orders after failing to keep up with the ground rent. The government will also change the rules on help-to-buy equity loans so that the scheme “can only be used to support new build houses on acceptable terms”.

Traditionally, houses have been sold as freehold, and the buyer has complete control over their property. When a house is sold as leasehold, the buyer is effectively only a tenant with a very long term rental, with the ground the home is built on remaining in the hands of the freeholder. The home buyer has to pay an annual “ground rent” to the freeholder, and has to ask the freeholder for consent if they want to make any changes to the property, such as building a conservatory or changing the windows.  Ground rents can double every decade, crippling home owners and in some cases making a property impossible to sell.

About 21% of private housing in England is owned by leaseholders, with 30% of those properties houses rather than flats, according to figures from the Department for Communities and Local Government. A recent government report also found that 4million private homes in England, or one in five, are leasehold.

The proposals are subject to an 8 week consultation.