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Ban on Leaseholds for New Builds

Communities secretary Sajid Javid is finalising plans for a leasehold ban on new builds as well as restrictions on ground rents.

Although flats may continue to be sold as leasehold, ground rents will remain at a ‘peppercorn’ level and represent little value to speculative purchasers.

While campaigners welcome the ban, it still raises a question mark over the status of current leasehold homeowners. The Department for Communities and Local Government will probably consult on what it can do to support them, such as giving them more power to fight unfair charges.

Literally thousands of homebuyers have been hit with skyrocketing ground rents, which leave some homes virtually unsaleable. Mr Javid provided the example of one property that has no sale value because the ground rent is projected to reach £10,000 a year by mid-century.

He said that it was abundantly clear that too many new homes were being sold as leaseholds, exploiting buyers with spiralling ground rents and unfair agreements. The proposed leasehold ban will make sure that the arrangement now works in the best interests of homebuyers.

Mr Javid said building firms should do more to support those impacted by these issues, but there were not yet any confirmed government plans to compel these companies to assist buyers who have already been affected.

New legislation will protect buyers who in the past could have faced repossession actions after ground rents became too high. The new laws will close legal loopholes to give home owners greater protection. The government will also apply changes to the help-to-buy equity loan rules so that the scheme will only support new house building on acceptable terms.

Sebastian O’Kelly welcomed the leasehold ban. Mr O’Kelly, head of Leasehold Knowledge Partnership, referred to leasehold homes as a means by which developers have turned ordinary residences into investment mediums for shady offshore investors.

The practice of selling leasehold homes has been especially prevalent in the Northwest. According to DCLG statistics, there were over four million such dwellings in England’s private sector in 2014-15, 1.2 million of which were leasehold homes.


Specialists in Construction Insurance

Justin Madders, Labour MP for Ellesmere Port and Neston said that these leasehold issues are a national scandal. After action was taken to stop such practices, he insisted that the people who knew the impact such an income stream would have on their customers must be held to account.

Another party who welcomed the leasehold ban was Jo Darbyshire, whose home has a clause stating that the ground rent doubles every 10 years. As a member of the National Leasehold Campaign group, she called for a national review of every case and a way for people to be restored to the position they would be in if such clauses did not exist.

Earlier this year, Taylor Wimpey consented to a deal worth £130 million to help leasehold buyers in financial distress. It conceded that the contracts that allowed ground rents to double every 10 years may have been legal, but were not consistent with the company’s customer service standards. It apologised for any resulting unintended concern and financial consequences that such an arrangement caused.


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