Government confirms leaseholds axed for all new houses

All new-build homes will be sold as freehold and leaseholds axed, the Government has announced, as part of its plans to tackle unfair leasehold practices in the residential property market.

The move is aimed at preventing unfair leasehold practices where home owners are trapped in exploitative arrangements and pernicious ground rents on new leases will be reduced to zero, preventing leaseholders being charged soaring fees for which they receive no benefit.

Secretary of State for Housing, James Brokenshire, also announced immediate action to ban Help to Buy being used to support leasehold houses, thus stopping taxpayers’ money being used to fund unjustified sale of leasehold houses.

In a wide-ranging speech to the Chartered Institute of Housing conference in Manchester, Brokenshire also said that freeholders and managing agents will be required to provide leaseholders with the vital information they need to sell their home within 15 working days and will not be able to charge a fee of more than £200.

He explained that he has instructed Homes England to renegotiate Help to Buy contracts to explicitly rule out the selling of new leasehold houses, other than in exceptional circumstances, to protect new home buyers from unscrupulous charges.

And where buyers are incorrectly sold a leasehold home, saddling them with a property that could ultimately prove difficult to sell, consumers will be able to get their freehold outright at no extra cost.

Other important proposals unveiled include new plans to make it easier for renters to transfer deposits directly between landlords when moving, extra funding for 19 new garden villages and radical new measures to speed up planning applications.

Brokenshire told the conference:

‘We have long recognised that we have a responsibility to confront unfairness in the leasehold market. Last year we consulted on proposals including the leasehold house ban and ground rent reduction. I can confirm we will go ahead with our original plan to reduce ground rents on future leases to zero, as opposed to a cap of £10 per year.

‘And we will legislate to ensure that in the future, save for the most exceptional circumstances, all new house will be sold on a freehold basis. We are committed to taking bold action to reform the sector and will be pressing ahead as soon as parliamentary time allows, helping us delivery our promise to make the home buying and selling process quicker, cheaper and easier.’

The Government’s proposals have already had a fundamental impact on the housing market since they were unveiled, with the sale of leasehold houses falling from 11% to just 2% this year.

The conference also heard that more than four million people live in the private rented sector, yet when moving home, some tenants can find it a struggle to provide a second deposit to their new landlord, risking falling into debt or becoming trapped in their current home.

Brokenshire announced that to help Ministers understand the scale of this problem, a consultation is now open for proposals to make it easier for renters to transfer deposits directly between landlords when moving from one property to the next.

He pointed out that freeing up deposits and allowing a renter’s hard earned cash to follow them from property to property as they move to take that perfect job, to move nearer to family, or find a place that suits their changing needs, will create a fairer housing market that works for all.

He also told the conference that an extra 19 garden villages will be created across the country, with the potential to deliver 73,554 homes. The Government is providing £2.85 million to support the development of plans for housing from County Durham in the North to Truro in the South West.

Each of the projects will be given £150,000 to progress planning applications and specialist reports needed before homes are built. The new developments include a dementia-friendly community village at St George’s Barracks, in Rutland, which would allow the elderly to live safely and independently in their own homes.

And Brokenshire explained that councils will be able to approve planning applications more quickly under radical new measures to remove bureaucracy from the system. He said that a new accelerated planning green paper, to be published later this year, will dramatically improve the planning process.

It is part of a renewed and refreshed focus on making sure planning authorities have the resources they need to act for the benefit of home owners, delivering a better service, faster than ever before.

This all comes as a further 18 leading property developers, managing agents and freeholders have signed up to the Government’s industry pledge, committing them to freeing existing leaseholders trapped in onerous deals where ground rents double every 10 or 15 years. This takes the total number of signatories to over 60.

Becky O’Connor, personal finance specialist at Royal London, said:

‘Leasehold charges were a nasty trap for buyers of new homes, which left many facing ever-escalating fees for as long as they live in that property. The Government’s move to make all new homes freehold will put buyers of new homes on a level playing field and is a victory for fairness. For too long the leasehold system has been misused.’

Kindly shared by Property Wire