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Leases on New Houses to be Banned, Ground Rents Could Also be Scrapped

Amid claims that as many as 100,000 existing homeowners remain trapped in properties that are ‘unsellable’, the communities secretary, Sajid Javid, outlined plans on the 25th of July to ban developers from selling new-build houses in England as leasehold, and restrict ground rents on new flats to as low as zero, following widespread outrage over exploitative contracts.

However, while the move has been widely welcomed, the proposed ban would relate to future sales, prompting existing homeowners to demand that the government come up with solutions for them also. Thousands of homebuyers have found themselves trapped in spiralling ground rent contracts where, in many cases, the annual amount they have to pay to the freeholder doubles every 10 years.

During the last few years, developers – particularly in the northwest of England – have been increasingly selling houses as leasehold that would traditionally have been freehold, with clauses that allow the ground rent to rise dramatically in later years. In many cases the developers sell on the freeholds to third parties – often offshore investment companies.

Javid stated that in some parts of northern England, leasehold had become the default tenure for consumers wanting to buy a new-build house. “It is particularly common practice in parts of Cheshire, Greater Manchester, Lancashire and Merseyside, but is not limited to these parts of the country,” he said.

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