Government announces ‘radical’ new proposals to ban unfair ground rents and the sale of leasehold houses

Sale of leasehold houses to be banned together with unfair ground rents

Consultation regarding proposals to limit ground rents and ban the sale of leasehold houses in England has been announced by the government today (25 July 2017) in what is described as a major move, aimed to deliver a fairer, more transparent system for homebuyers.

Communities Secretary Sajid Javid has set out plans to ban new build houses being sold as leasehold as well as restricting ground rents to as low as zero, there are estimated 1.2 million leasehold houses in England.

Commenting on the announcement, Sajid Javid said: It’s clear that far too many new houses are being built and sold as leaseholds, exploiting home buyers with unfair agreements and spiraling ground rents. Enough is enough. These practices are unjust, unnecessary and need to stop.

Sir Peter Bottomley, co-chair of the all-party parliamentary group on leasehold reform, welcomed the crackdown but said action should be taken to help those with unfair existing leases.

The Conservative MP told the Press Association: “Having control and hopefully abolition of unjustified and unnecessary fees, which would apply to existing leasehold as well as future ones, then I would argue that if not covered by existing law, there should be action taken by Parliament so that unfair existing terms or existing leases can be struck out as unreasonable.”

Sir Peter, who said responsible freeholders had “nothing to fear” from the proposals, added: “It sounds as though the Government is going beyond what was in any party’s manifesto – this will be welcomed by everyone concerned for the wellbeing and welfare of leaseholders and there are more steps needed to make the dispute system work fairly and at very low cost.”

Additional measures, which will form part of an 8-week consultation, include:

  • Setting ground rents to zero levels – in recent years these have increased significantly, in some cases doubling every 10 years
  • Closing legal loopholes to protect consumers – such as leaving some leaseholders vulnerable to possession orders
  • Changing the rules on Help to Buy equity loans so that the scheme can only be used to support new build houses on acceptable terms

Ground rents are charged on all residential leasehold properties but evidence shows that they are becoming increasingly expensive. Under government plans they could be reduced so that they relate to real costs incurred, and are fair and transparent to the consumer.

The proposed prohibiting of future houses being sold as leasehold will apply to all houses apart from a few exceptional circumstances where leasehold is still needed – such as houses that have shared services or built on land with specific restrictions, in these instances it is likely that ground rents will be set at zero.

The consultation will last for 8 weeks from 25/07/20. DCLG statistics estimate that in 2014 to 2015, 30% of residential dwellings in England in the private sector were leasehold.