Thousands of homebuyers could still be “sleepwalking into leasehold limbo” despite the government’s pledge to ban new-build leasehold houses, a property expert has said.
In December 2017 then communities secretary Sajid Javid had pledged to end the “exploitation of homebuyers through unnecessary leaseholds” by legislating to prevent the sale of new-build leasehold houses except where necessary, such as shared ownership.
In July this year current communities secretary James Brokenshire put further weight behind the pledge, promising to to tackle “unfair and abusive” practices within the current leasehold system and cease funding of “unjustified” leasehold houses through government schemes.
But one year on from Mr Javid’s initial announcement, it has been claimed developers have continued to sell thousands of new-build houses with leaseholds – some believed to be funded via the Help to Buy scheme.
Phil Spencer, co-founder of property advice site Move iQ, said: “A year on from the government’s pledge to ban the sale of new build leasehold houses, thousands of buyers are still being allowed to sleepwalk into leasehold limbo.
“And in a further ironic twist, many are even being encouraged to do so by the Help to Buy scheme.”
The firm’s analysis of Land Registry figures showed 26,024 new-build properties have been sold with leaseholds since the government’s pledge last December, 2,644 of which were houses.
Data from the Ministry of Housing, Communities and Local Government showed 5,949 leasehold homes were bought with assistance from the Help to Buy scheme in the first six months of this year- 1,340 were houses.
Mr Spencer said: “Millions of Britons live happily in leasehold homes. But anyone buying a leasehold property needs to do so with their eyes wide open, and should take legal advice to understand the obligations that go with owning a home this way.
“While leasehold tenure is normal for flats, the government says it is determined to stop newly built houses being sold in this way – while at the same time offering Help to Buy incentives. These mixed messages are deeply confusing.”
Mr Spencer said when the ban is introduced there should be some redress for the thousands who have bought leasehold houses.
He said: “At the very least they should be given first refusal on the freehold of their home at a reasonable rate, before it is sold on to a third party.”
The Ministry of Housing, Communities and Local Government has recently launched a technical consultation on how to implement reforms to the leasehold system, which shut at the end of November.
It is now considering next steps with a view to bringing forward legislation in due course.
A spokesperson said: “It’s unacceptable for home buyers to be exploited through unnecessary leaseholds on new houses.
“We have announced measures to ban leaseholds for all new build houses unless there is a genuine reason, and ensure ground rents on new long leases are set to a peppercorn.”
It is understood that development contracts in place until March 2021 prevent the introduction of an outright ban on the sale of leasehold houses or setting terms around ground rents without giving risk to legal challenge.
But the government said: “We have been clear in telling developers that Help to Buy funding should not be used for leasehold houses, and recent statistics show this practice is already reducing.”
Source: FT Adviser