Government unveils new build leasehold ban

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Government unveils new build leasehold ban

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.

Leaseholds account for 4 million homes in the United Kingdom - but recent scandals have emerged in this sector, with developer Taylor Wimpey setting aside £130 million to compensate buyers of new-build leasehold homes.

"The government's consultation is considering additional changes that would look to address unfair practices, and we look forward to exploring these proposals in due course".

Traditionally, leasehold properties are flats, which have shared communal spaces such as entrance halls.

But thousands of houses are now being sold as leasehold, which the government has criticised as partly an attempt for developers to boost their profits. Leaseholds let developers raise ground rents to as much as £10,000 a year.

In Britain, apartments are mainly sold as leasehold whilst houses are generally sold as freehold. When purchasing any property, new build or not, with a long lease, the ground rent should always be peppercorn, but it does come down to the conveyancing process and for the buyers solicitor to carefully check the sales contract and ensure buyers interests are protected.

In April 2017, developer Taylor Wimpey apologised for the doubling ground rent clause in some of its leases and it's negotiating with companies that have bought its freeholds to review this clause, setting aside £130 million to pay for this.

What does the government intend to do?

'Leasehold agreements for houses and the subsequent ground rents that are charged, artificially distort a housing market that is already struggling with issues surrounding affordability. According to the HomeOwners Alliance, the number of new builds sold as leasehold has doubled since 1996 to 43 per cent.

Understanding how leaseholds work can be a complicated business.

· 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.

The measures also include closing legal loopholes to protect consumers who may be vulnerable to possession orders.

Government data reveals that out of around 4 million leasehold properties around 1.2 million are leasehold houses - with the practice widespread in the North West.

If you're looking to buy a leasehold property, or have bought one in the last few years and are concerned about your arrangements, you can contact the Leasehold Advisory Service - a government-backed body which offers free initial advice via telephone.

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