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What the government's ban on new build leasehold houses will mean for leaseholders

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The government has announced plans to tackle “unfair and abusive” practices within the leasehold system, including banning leaseholds for most new build houses. These plans will only affect houses and not leasehold flats.

The new measures announced by Communities Secretary, Sajid Javid include:

  • A ban on almost all new build houses being sold as leasehold
  • Ground rents on new long lease property being set to zero
  • Making it cheaper and easier for existing leaseholders to buy the freehold on their home

While this is welcome news for prospective buyers of new builds, there are also fears that this could have a negative effect for existing leaseholders.

The issues with the UK’s new build leasehold market

In recent years it has become common practice for residential property developers to sell new build houses on a leasehold basis, rather than on a freehold basis. This has left homeowners with the requirement to pay annual ground rents and service charges, which are often substantial.

A particular issue is that many of these leasehold properties were sold with terms allowing the ground rent to double every ten years, meaning these costs could quickly escalate. As a result many mortgage lenders were unwilling to lend on these new build leaseholds, making it virtually impossible for some owners to resell their homes.

Another common complaint was that developers were selling the freeholds on to offshore firms, making it harder and more expensive for homeowners to buy the freehold when they became eligible to do so. Under UK leasehold enfranchisement laws, leaseholders must have occupied a property for at least two years before they have the legal right to force the freeholder to sell them the freehold.

How the changes will affect leaseholders

While these changes will benefit those looking to buy new build house by allowing them to buy the freehold at the outset, rather than feeling trapped into a leasehold deal, it has been suggested that these changes will create a two-tier system that discriminates against existing leaseholders.

Because the changes will prevent new houses being sold as leaseholds, it could leave existing leaseholders in a worse position, as it will make their houses seem even less desirable by comparison. For many, the only short term solution is likely to be to buy the freehold on their home, so leaseholders will need to pay close attention to the measures put in place with the intention to make this easier and cheaper once more detail about these is revealed.

Protecting your interests when buying leasehold property

When buying a leasehold property, it is absolutely essential to understand the full terms of your lease and how these will impact you in the future, including your ability to resell. It is therefore strongly recommended to use a conveyancing firm with plenty of experience in handling leasehold property.

Bird & Co Solicitors is a long-established law firm offering conveyancing services for all types of property, including leaseholds. Our conveyancing solicitors can assist you with all leasehold property transactions, including buying and selling leasehold property, lease extensions and leasehold enfranchisement. We are accredited by the Law Society’s Conveyancing Quality Scheme, reflecting the high standards of our service.

To find out more about our leasehold property conveyancing services, call us today on 01476 591711 or use our contact page to find details of your nearest Bird and Co office.