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Ban on selling newbuild homes with leasehold will come into effect

The government is pushing ahead with legislation to ban the sale of newbuild homes with a leasehold except in certain circumstances. Communities Secretary Sajid Javid said the changes in leasehold law will apply only in England and outlaw “unfair and abusive practices” that can see leaseholders hit with expensive annual ground rent rises.

The announcement follows a short consultation that prompted 6,000 responses from homeowners, leaseholders, freeholders and other interested parties in the leasehold system.

Leasehold applies where a freeholder retains ownership of the land on which a property is build and is paid an annual ground rent for as long as the lease runs. Leaseholders often have to pay management charges, too, particularly where services and facilities are shared, such as in blocks of flats.

Ending exploitation

Confirming the changes apply only in England, Mr Javid said newbuild homes will be sold freehold except in cases of shared ownership. Ground rents on new long leases will be set at zero for both houses and flats, while existing leaseholders will be able to buy the freehold of their property more cheaply and easily.

The minister 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.”

Setting ground rents at zero

There are 1.4 million leasehold houses across England, but leasehold sales are growing rapidly amid accusations of unfair pricing and prohibitive costs imposed on leaseholders.

The Department for Communities and Local Government said the measures to be introduced include:

  • Legislating to prevent the sale of newbuild leasehold houses except where necessary, such as shared ownership
  • Ensuring 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
  • A wider internal review of the support and advice to leaseholders to make sure it is fit for purpose in this new legislative and regulatory environment
  • Making sure freeholders have equivalent rights to leaseholders to challenge unfair service charges
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