What’s next for new-build leasehold buyers?

Government consultation into unfair practices closes tonight

A number of people buying brand-new homes face leasehold agreements with doubling ground rents or unreasonable restrictions. The government consultation into ‘unfair leasehold practices’ closes today – and there’s still time to have your say.

In July, the government launched an eight-week consultation into ‘unfair leasehold practices’ – with a particular focus on the sale of new-build homes as leaseholds and spiralling ground rent clauses.

Here, you can learn more about the proposed reforms, and discover how you can get involved before the deadline passes at midnight.

Leasehold new-build homes could be banned

Under the government’s proposals, leasehold new-build houses would be banned – except for in ‘exceptional circumstances’. In addition, ground rents on these properties would be reduced to zero, or a figure that relates to actual costs incurred by the freeholder.

The government is also consulting on how it could amend the rules of the popular Help to Buy equity loan scheme, to ensure it’s only available on houses with ‘acceptable terms’.

The consultation comes after a number of buyers reported issues with new-build properties sold as leaseholds. Many houses were sold with a ‘doubling ground rent clause’ – meaning the ground rent payable on the property doubled every ten years. In one case highlighted by the government in a statement, the ground rent was due to increase to £10,000 by 2060, effectively making the home impossible to sell.

Some owners also faced unreasonable restrictions on what they were able to do with their properties – for example, being charged high fees for making minor alterations to their home.

Leasehold consultation: how you can get involved

Whether you’re a leaseholder or freeholder, it’s not too late to contribute to the government’s consultation, as responses will be accepted until midnight.

The survey includes questions on the following topics:

  • Prohibiting the sale of new-build leasehold houses
  • Changes to the Help to Buy scheme in relation to leasehold houses
  • Limiting both the starting cost and any increases in ground rents on long-term leases
  • Updating the Housing Act so long leases with annual ground rents of more than £1,000 (London) or £250 (outside London) cannot be Assured Tenancies
  • Providing freeholders with the same rights as leaseholders to challenge the ‘reasonableness’ of service charges in tribunals

If you’re interested in contributing, read the government’s consultation document before filling in the survey.

What’s likely to happen next?

The next step is for the government to analyse the responses to its consultation – but as it stands there’s no concrete information on how long this could take.

Which? approached the Department for Communities and Local Government (DCLG) for comment, but has not received a response at time of publishing.

What doesn’t the consultation cover?

This consultation is primarily aimed at reforming the rules around the sale of leasehold new-build homes.

While the views of existing leaseholders are being sought, there’s currently little information available on how those already suffering from onerous ground rents could be offered redress in the future.

It also remains to be seen whether individual developers and mortgage lenders will now assess how they approach leasehold homes differently.

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