Government proposes ban on selling new builds as leasehold

Radical new proposals to cut out unfair abuses of leasehold have been announced by the government.

Communities Secretary Sajid Javid has set out plans to ban new build houses being sold as leasehold as well as restricting ground rents to as low as zero.

Leasehold generally applies to flats with shared spaces, but developers – particularly in the north west – have been accused of selling houses on these terms.

“It’s clear that far too many new houses are being built and sold as leaseholds, exploiting home buyers with unfair agreements and spiralling ground rents,” Communities Secretary, Sajid Javid said. “Our proposed changes will help make sure leasehold works in the best interests of homebuyers now and in the future.

Other measures, which are now subject to an 8-week consultation, include:

• setting ground rents to zero levels – in recent years these have increased significantly, in some cases doubling every 10 years;
• closing legal loopholes to protect consumers – such as leaving some leaseholders vulnerable to possession orders;
• changing the rules on Help to Buy equity loans so that the scheme can only be used to support new build houses on acceptable terms.

Under government plans ground rents could be reduced so that they relate to real costs incurred. The proposed prohibiting of future houses being sold as leasehold will apply to all houses apart from a few exceptional circumstances where leasehold is still needed – such as houses that have shared services or built on land with specific restrictions.