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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

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Government announces crackdown on leaseholds for new-build houses

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