Almost all new-build houses will in future have to be sold as freehold, and ground rents will be capped at just £10 a year.
The Government made the announcement at midnight on Saturday, and a new consultation on the plans will be launched today by Communities Secretary James Brokenshire.
The announcement said that leaseholders currently pay on average over £300 ground rent a year, with some paying as much as £700.
There was no suggestion that the move will be retrospective, implying that some recent home owners could still find their properties difficult to sell.
Brokenshire said: “Unfair ground rents can turn a home owner’s dream into a nightmare by hitting them in the back pocket, and making their property harder to sell.
“That’s why I’m taking concrete action to protect home owners and end those unscrupulous leasehold practices that can cost tenants hundreds of pounds.
“While leasehold generally applies to flats with shared spaces, a number of developers have been increasingly selling houses on these terms – placing further financial burdens on those looking to buy a house of their own through unnecessary surcharges like ground rent.
“This can also mean that selling their home is more expensive and take longer than selling a freehold property.
“Under the Government’s proposals, which are subject to consultation, the majority of new houses will be sold as freehold, and future ground rents will be reduced to a nominal sum.
“The consultation will also seek views on what are the appropriate and fair exemptions, such as shared ownership properties and community-led housing to ensure consumers’ best interests are at the heart of the property market.”
Notably, the announcement made reference to the Tenant Fees Bill, saying that the new crackdown on leasehold practices “builds on action under way to make the property market fairer, including a crackdown on rogue landlords and ending unfair charges for tenants”.
The consultation will run for six weeks and estate agents are among those specifically invited to comment.
Yesterday evening, NAEA chief executive Mark Hayward said: “Thousands of home owners across the country are facing escalating ground rents, charges for making alterations to their properties and unable to sell their home.
“Therefore, it’s only right that the Government looks to crackdown on unfair leasehold practices to stop even more people feeling trapped in homes they cannot afford to continue living in.
“Our recent Leasehold: A Life Sentence? report found almost half (45%) of leasehold house owners didn’t know they were only buying the lease until it was too late, two thirds (62%) feel they were mis-sold and the vast majority (94%) regret buying a leasehold.
“This shows that for too long, housebuilders and developers have not been transparent enough about what it actually means to buy a leasehold property.
“However, this announcement is only good news for those looking to buy a leasehold property in the future.
“With 4.2 million leasehold properties in England, many will remain stuck in their lease with no straight forward way out and the industry needs to help them.”
Source: Property Industry Eye