Communities secretary Sajid Javid has unveiled proposals to crack down on “unfair charges” levied on buyers of new-build houses in England.
The minister has launched an eight-week public consultation which proposes banning leaseholds on new-build houses and dramatically reducing ground rents.
Traditionally houses have nearly always been sold as freehold properties, meaning the buyer owns the building and land it is built on outright.
But the trend for new-build houses being sold as leasehold has accelerated in recent years as housebuilders looked to other means to make up margins during the credit crunch.
Ground rents can double every decade, crippling homeowners and in some cases making a property impossible to sell.
“Enough is enough. These practices are unjust, unnecessary and need to stop,” said Javid.
He said that there were 1.2 million cases of houses on leasehold, and the situation of escalating costs was one example of a “broken housing market”.
He said the proposals would affect future sales, but those already facing difficulties would generally need to seek redress from the housebuilder or, if the situation was not made clear at the point of sale, their solicitor.
“Builders and developers should be seeing what they can do to right some of the wrongs of the past,” he told the BBC’s Today programme.
Leaseholders typically pay ground rent to the freeholder, but can be caught out by clauses allowing for dramatic increases in these fees, which come on top of management charges for the upkeep of communal areas.
The government has cited examples of:
- A homeowner being charged £1,500 by the freeholding company to make a small change to their family home;
- A family home which is now impossible to sell because the ground rent is expected to hit £10,000 a year by 2060;
- A homeowner who was told buying the lease would cost £2,000 but the bill came to £40,000.
MPs have described the situation as a “national scandal” and the “PPI of the housebuilding industry”.
The Department for Communities and Local Government said its proposals aimed to make future leases fairer by reducing ground rents so they “relate to real costs incurred”.
About 21% of private housing in England is owned by leaseholders, with 30% of those properties houses rather than flats, according to figures from the DCLG.
The House Builders Federation said: “The industry is committed to working with all parties to ensure that the terms on which leasehold homes are sold are fair and work for the homeowner.
“Buying and selling apartments on a leasehold basis is a long accepted form of ownership and provides security for people with communal facilities. There are instances where houses need to be sold on a leasehold basis, for instance where land has been acquired from local authorities, other public bodies or the Crown on a leasehold basis.”
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