Leaseholds on new-build properties to be banned by Government
Rip-off leaseholds and sky-high ground rents could become a thing of the past for new buyers, although existing buyers might not benefit.
Housebuilders in England could be banned from selling new-build properties as leasehold under new Government plans.
Buyers of new-builds are increasingly being hit with extortionate ground rent charges, which can double every 10 years, potentially leaving them unable to resell the property.
Today, communities secretary Sajid Javid has pledged to “ban new-build houses being sold as leasehold as well as restricting ground rents to as low as zero”.
Sadly for those already trapped in a costly leasehold, the ban will only apply to future sales.
However, Javid did urge builders to “right some of the wrongs of the past" in an interview with the BBC.
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What is a leasehold?
Unlike a freehold property, where the buyer owns both the land and the property, a leasehold effectively means the buyer only owns the property for a set amount of time, and will generally have to pay ground rent to the leaseholder.
Such an arrangement is typical with flats, but there are still around 1.2 million leasehold houses in England and Wales, according to Javid.
The practice has become far more common in recent years, as builders look to boost profits on new-build properties.
The Government will now embark on an eight-week consultation on how a ban on leaseholds could be implemented.
“Our proposed changes will help make sure leasehold works in the best interests of homebuyers now and in the future,” Javid explained.
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‘Onerous leaseholds’
Explaining the decision to embark on a consultation, the Department for Communities and Local Government highlighted how many leases were becoming “increasingly onerous”.
It mentioned the example of a family who were unable to sell their home primarily because annual ground rent was expected to hit £10,000 by 2060.
It also cited the example of a homeowner who was told buying the lease would cost £2,000, but the final bill came to £40,000.
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Leasehold vs Freehold property: what you need to know
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My guess is that buyers of new homes have little choice as this is just a new way of extracting maximum profit. The lease is then sold at an inflated price to investment groups who inflate things even more and just sit back with another bottle of Bolly while they look for the next rip off scheme. If politicians spent more time doing what they were elected for instead of infighting, telling lies and looking for means of self gratification they might actually get around to doing something about this and all of the other ways this country and its population are being ripped off by foreign investors and asset strippers. Is this just another mess that has been dragged into focus by our press?
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Presumably the buyers of these Leasehold houses had it fully explained to them by their solicitors/conveyances before they bought their property, if so there is little justification to complain after the purchase. If however the difference between Freehold and Leasehold purchases wasn't fully and properly explained then there may well be a case for the next miss-selling scandal against the builder's, the builder's selling agent and/or their solicitor/conveyancer. I'm guessing though these buyers were blinded by their 'want' to have that particular home and didn't give enough thought to the consequences of buying Leasehold properties. In which case it's no good saying now, that someone else must be at fault!
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Easy way around this. I live in a freehold house but the roadway outside is managed by the company who own and manage the nearby flats. They charge us collectively £3,600 to 'manage' the roadway. Anything they do to it - repair street lights, cut hedges, clear drains - is charged on top (plus a commission). Then there's insurance. You will never guess who the insurance broker is! Of course, it's another subsidiary of the same corporate group. Competitive tendering ? Just get two group companies to quote. Residents haven't the time to spot the rip-off. What we need is a moral, ethical, property management industry - and a pig flew past my window just then.
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26 July 2017