Leasehold ban proposed for new-build houses

The government is seeking to end ‘long-term financial abuse’ by some developers who are selling new-build homes on a leasehold basis.

Leaseholders typically pay ground rent to the freeholder, but can be caught out by clauses allowing for dramatic increases in these fees.

Ground rent typically rises in line with inflation, but in some cases, the owner of the freehold has set a faster pace or has sold the freehold to a private investment company without informing the homeowners.

A recent government report found that 4 million private homes in England are leasehold, which equates to 1 in 5 five homes.

Communities secretary Sajid Javid today proposed the plans for all developers to be prohibited from selling all houses as leasehold.

"What we've seen, in the last few years especially, is a huge increase in the number of houses, not flats but houses, that are being sold on leasehold terms for no good reason.” He Said

"And worse still, once they've been sold, those people that have bought those houses are then subject to ground rents that are ever escalating.

"These are just being used as another income stream by developers, not in the interest of consumers."

The leasehold system that has been around for many years, typically applies to blocks of flats but the trend for new-build houses being sold on the same system has risen in recent years.

The House Builders Federation, whose members deliver around 80% of the new homes built each year said: "The industry is committed to working with all parties to ensure that the terms on which leasehold homes are sold are fair and work for the homeowner”.

"Buying and selling apartments on a leasehold basis is a long accepted form of ownership and provides security for people with communal facilities. There are instances where houses need to be sold on a leasehold basis, for instance where land has been acquired from local authorities, other public bodies or the Crown on a leasehold basis."

While there is an acknowledgement from the Government that where there are shared facilities, such as in the case of apartments, there is a justifiable reason for them to be leasehold; MCR Homes have for a while now, recognised that some developers aggressively ramp up ground rents.   All of our leasehold apartments however, are in line with RPI and therefore only increase in line with inflation.

MCR Homes welcome any new industry legislations ensuring that all of our clients can feel confident when using our residential or investment services.