Marijana No Comments

Leasehold axed for all new houses

All new-build houses will be sold as freehold in a bold move to tackle unfair leasehold practices, and ground rents for new leases will be reduced to zero, the communities secretary has stated.

In a wide-ranging speech to the Chartered Institute of Housing conference in Manchester today, James Brokenshire MP confirmed plans to abolish the selling of new houses as leasehold properties. This will prevent future homeowners from being trapped in exploitative arrangements.

New rules will also be introduced to stop freeholders and managing agents taking as long as they want – and charging what they want – to provide leaseholders with the information they need to sell their home.

There will be a new time limit of 15 working days to provide information and a maximum fee of £200. This should make the home buying and selling process quicker, easier and cheaper.

Help to Buy

The secretary of state has also 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.

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.

A further 18 property developers, managing agents and freeholders – including Crest Nicolson and Keepmoat Homes – have signed up to the government’s industry pledge.

This commits 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.

Other proposals

Other proposals unveiled include making it easier for renters to transfer deposits directly between landlords when moving; extra funding for 19 new garden villages with the potential to deliver 73,554 homes; and new measures to speed up planning applications.

New Homes Ombudsman

A consultation has been launched on redress for purchasers of new build homes and the setting up of a New Homes Ombudsman to protect the rights of homebuyers and hold developers to account.

The consultation seeks views on the detail of the proposed legislation and runs until 22 August.

£2 billion affordable homes funding

The communities secretary has opened the bidding process for £2 billion in long term strategic partnerships to deliver additional affordable homes through housing associations with funding available until March 2029.

The government says these new bids will continue to build on the 430,000 affordable homes delivered since 2010.

Comment

Brokenshire said: “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.

“Today 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 houses 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.”

By Joanne Atkin

Source: Mortgage Finance Gazette

Marijana No Comments

More houses make for a better balance

The plight of leasehold new build home owners has been well documented and earlier this year the government moved to ban such arrangements going forward.

But if anything, this episode highlighted the conflicts in the home-buying chain that means a customer’s welfare is not always at the heart of the process – even though it should be.

The number of leasehold houses in England is significantly higher than previously estimated, according to the Department for Communities and Local Government. It estimated in September that there were 1.4 million leasehold houses in England in 2015-16, compared with the previous estimate of 1.2 million in 2014-15, following a change in methodology to include socially rented properties.

For those trapped in leasehold houses, there is a long road to travel. The government has said it will consider what it can do to help the hundreds of thousands of existing leaseholders who face “onerous” annual payments.

While some lenders have stepped back from the market, finger pointing has already begun. But regardless of where the blame for this episode lies, the entire development in new build highlights a paradox. It’s unlikely that in any other walk of life you would buy or undertake such a large financial commitment with unknown or very onerous foreseeable liability.

The question is what causes people to throw caution to the wind or at least ignore their better instincts. Home buying is for most people an emotive business and combined with the inexperience of first-time buying, it’s easy to see how many can end up on the wrong side of a bad deal.

Notwithstanding all the advice out there, or perhaps in ignorance of this counsel, first-time buyers do exactly this every day of the week. While many are correctly advised of these facts by their conveyancer it seems clear the lack of supply again has enticed people to sacrifice the mid-term financial downside for the immediate ability to get a house.

A lack of supply has once again led to consumer detriment, which is why it is so important we endeavour to address this national housing crisis. By re-adjusting the odds in favour of buyers, we can mitigate their purchase risks.

Source: Mortgage Finance Gazette

Marijana No Comments

UK housebuilders fall after ban on new home leaseholds

Shares in UK housebuilders fell on Thursday after the government banned the sale of new homes on a leasehold basis, starting immediately.

The government said new ground rents would be set at zero as it aimed to end “feudal practices” in Britain’s residential construction industry.

Leaseholds are traditionally applied to flats and apartment blocks where the upkeep of shared spaces is maintained by the building’s leaseholder, who charges residents a “ground rent” to pay for this maintenance.

Single-occupier ground rent

But more recently, some housebuilders have applied such charges to new, single-occupier builds for the permission to make changes to the property. It is this practice that the government aims to stop with the new rules.

Sajid Javid, communities secretary, said: “It’s unacceptable for home buyers to be exploited through unnecessary leaseholds, unjustifiable charges and onerous ground rent terms.”

McCarthy & Stone tumbles

The government estimates that about 1.4 million households across England are on leaseholds, up from 1.2 million in 2015.

The announcement hit shares across the sector. Worst hit was retirement housebuilder McCarthy & Stone, whose chief executive Clive Fenton (left) criticised the government’s actions.

He said: “The proposal to set all ground rents to zero will result in a disruption of housing supply and contradicts the government’s stated objective of seeking new sources of housing.”

The company had expected to generate nearly £33m in profits from freehold reversion sales in 2018. Shares in McCarthy & Stone tumbled 10.59% to 152p in the first hour of trade on the London Stock Exchange.

Other market reaction

Other housebuilders were also lower. Persimmon lost 1.14% to £26.91, while Barratt Developments shed 1.01% to 636.5p, Taylor Wimpey fell 0.82% to 204.3p and Berkeley Group slid 1.67% to £41.39.

Source: Capital.com