Government to abolish leasehold houses

New build leasehold houses will be banned and ground rents on new flats are to be kept at peppercorn levels and may even be cut to zero as part of a government shake-up of leaseholds.

Communities Secretary Sajid Javid made the pledge as he revealed his plans following a groundswell of anger from homeowners.

Developers have faced growing criticism for selling new houses with leases, which have seen many ground rents rising in line with inflation.


Some include a clause that doubles the fee every decade, hammering homeowners’ finances and drastically reducing the value of the property. As a result, many owners have been refused mortgages in new properties, leaving them trapped.

While flats will still be sold as leasehold, Mr Javid said that ground rents would be restricted to “peppercorn” levels to be of little financial value to speculative buyers.

He told Radio 4’s Today programme: “It is clear that far too many new houses are being built and sold as leaseholds, exploiting homebuyers with unfair agreements and spiralling ground rents.

“Enough is enough. These practices are unjust, unnecessary and need to stop. Our proposed changes will help make sure leasehold works in the best interests of homebuyers now and in the future.”

The move has been welcomed by the Leasehold Knowledge Partnership. In a statement it said: “Leasehold houses are an absolute racket: a means by which developers have managed to turn ordinary people’s homes into long-term investment vehicles for shadowy investors, often based offshore.

“Last year, 10,300 leasehold houses were registered on the Land Registry. In 2010 the figure was 3,420. Unfortunately, they have not just been disadvantaging leasehold house owners. Thousands of leasehold flats have also been sold with these toxic ground-rent terms.

“Altogether as many as 100,000 houses are unsellable as a result of this trickery.”

The ban is expected to come into force after an eight-week consultation period.

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