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New build houses to be sold as freehold

Ministers are getting ready for summer by tying up loose ends. Last week they announced the long awaited ban on leasehold houses, ground rents on new leasehold properties to be set to zero, and the launch of a consultation on the New Homes Ombudsman. Here's what it all means...

ban leasehold housesLong awaited leasehold reforms

Last week the government confirmed it’s previously announced plans to abolish the unjustified practice of selling new houses as leasehold properties.

Legislation will be needed, but the government’s proposals have already had a positive impact on the housing market since they were unveiled some time ago, with the sale of leasehold houses falling from 11% to just 2% this year.

This announcement came alongside an attempt to get a grip on spiralling ground rents. All ground-rents on new leases will be reduced to £0 – not £10 as proposed initially – preventing new leaseholders being charged soaring fees for which they receive zero benefit.

Immediate action to ban Help to Buy being used to support leasehold houses – stopping taxpayers’ money being used to fund unjustified sale of leasehold houses

The government also announced measures to put a stop to freeholders and managing agents taking as long as they want to provide information needed for selling a home. The government has set a new time limit of no more than 15 days and a maximum fee of £200 for managing agents and freeholders to supply leasehold information about the property to prospective buyers.

What about people already living in a leasehold house?

The ban on selling new build houses as leasehold only applies to new houses, which means properties already built can still be sold as leasehold – as can new-build flats. Likewise, the ground rent changes will only apply to new leases.

There is very little in the announcements for existing leaseholders suffering currently from unfair ground rent in leasehold houses and flats.

Speaking to Estate Agent Today, Louie Burns, from The Leasehold Group of Companies, says: “…there are thousands of people who already own houses on a leasehold basis and these proposals do not remove their obligation to pay ground rents.

“These proposals do nothing to help existing leaseholders and will create a two-tier market, where the values of leasehold houses will fall further as the properties become increasingly unattractive to buyers.”

So there is still work to be done if Government is to address the still extensive and pernicious ground rents which will leave homeowners trapped in increasingly blighted homes. If you live in a leasehold house, here’s what you need to know.

Louie Burns added, “Something must now be done to help those already trapped by the leasehold house scandal, not to mention the millions of leasehold flat owners who are still affected by onerous ground rents, unfair service charges and exploitative informal leases that offer no legal protection. The government now needs to act quickly to help the many people already caught in this trap.”

The government continues with a voluntary “industry pledge” to encourage property developers, managing agents and freeholders – including Crest Nicolson and Keepmoat Homes – to free existing leaseholders trapped in onerous deals where ground rents double every 10 or 15 years. There are currently 60 signatories to the pledge.

Why the exemptions?

There will also be some exemptions to the ban on selling leasehold houses. Speaking to Estate Agent Today, Louie Burns is fiercely critical of these exemptions which include the Crown Estate, the National Trust and the retirement sector.

“To enable freeholders to continue to profit by exploiting retired people through ground rents and event fees is absolutely scandalous” he claims.

New Homes Ombudsman

Last week the government also reiterated it’s ambition for a New Homes Ombudsman and launched a two-month consultation. The Ombudsman would hold developers to account for selling poor quality residences, something which we at the HomeOwners Alliance hear about too often.

The government is consulting on:

  • the role that a New Homes Ombudsman will play. It is suggested that the Ombudsman will not be a regulator with the powers to impose fines or take legal action against developers but it will provide redress where a consumer has a complaint and be able to access compensation for what has gone wrong.
  • who should be required to be a member of the New Homes Ombudsman e.g. developers, self builders, freeholders etc.

And recognising that we will need to wait for legislation for these changes, the government is keen to put in place an independent voluntary code of practice for new homes. It is insisting that all housing developers must belong to an Ombudsman if they want to participate in Help to Buy from 2021.

The government deadline for comments is 22nd August and we would encourage you to either send your thoughts directly to government  or leave comments below – or by emailing – so we can flag your concerns in our response.  

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