Announced on 25th July, new government proposals have been designed to put a stop to the potential “exploitation” of would-be home buyers by banning the sale of new-build homes under a leasehold agreement.
Communities Secretary, Sajid Javid, has deemed the associated fees and costs from landowners of leasehold properties, such as ground rents and service charges, “unjust” and “unnecessary”, and they could be banned entirely under these new proposals.
Traditionally, leasehold properties would be apartments or flats, where the land on which the property was built would not be owned by the tenant and the lease would be anywhere between 99 and 999 years in length. However, it has emerged that more than a quarter of the four million Brits who live in leasehold properties, live in houses. Mr Javid said: “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. Enough is enough. These practices are unjust, unnecessary and need to stop.”
The proposals include measures to close legal loopholes to protect leaseholders who are at risk of being hit with possession orders, and a change in the rules on Help to Buy equity loans meaning they can only be used for new build houses on acceptable terms. However, for chair of the all-party parliamentary group on leasehold reform, Sir Peter Bottomley, the proposals should not stop there. Whilst welcoming the proposed reform, the Conservative MP urged that action should also be taken to help those with existing unfair leases. Sir Bottomley said that “there should be action taken by Parliament so that unfair existing terms or existing leases can be struck out as unreasonable.”
Leasehold reforms are something that the Labour Party, and Shadow Housing Secretary, John Healey in particular, have campaigned for over a number of years. In April 2017, Healey spoke out against the current leasehold system, stating that: “Labour would start by giving leaseholders security from rip-off ground rents and end the routine use of leasehold ownership in new housing developments.”
This announcement highlights the ambitions of a weakened Conservative Party, wanting to achieve quick wins through cross party support for non-contentious issues, as they regroup following the general election. Housing remains a key policy issue for the government and it will be interesting to see how the eight-week consultation on leasehold reform follows into a policy that can be agreed in the commons.