Government will ban sale of new-build houses as leasehold

Ground rents on new leases will also be slashed to zero in reform to be implemented ‘as soon as parliamentary time allows’

Houses under construction in Cheshire (Getty/iStock)

The government will outlaw the sale of new-build houses as leasehold, a form of ownership that has saddled thousands of homeowners with extortionate fees and, in the worst cases, unsellable properties.

All new houses will be sold on a freehold basis and ground rents on new leases will be reduced to zero, the Ministry of Housing, Communities and Local Government announced on Thursday.

“We have long recognised that we have a responsibility to confront unfairness in the leasehold market,” James Brokenshire, the communities secretary, said.

“We will legislate to ensure that in the future – save for the most exceptional circumstances – all new houses will be sold on a freehold basis. We are committed to taking bold action to reform the sector and will be pressing ahead as soon as parliamentary time allows.”

Consumer groups and others have warned for years that buyers of leasehold houses and flats have been ripped off on a large scale.

Leaseholders are granted the right to live in their property for an agreed period – usually between 99 and 125 years.

Under the lease, the freeholder typically charges ground rent to the leaseholder. Charges can also be levied for making alterations to a leasehold house. A significant number of leaseholders say they have been hit with unjustifiable rises to the ground rent or unfair charges for making minor cosmetic changes such as changing a doorbell.

Owners of leasehold flats have complained about high service charges and a lack of transparency over what they are being charged for, as well as excessive administration fees.

In the most extreme cases, charges have been so high that leasehold houses and flats have become difficult to sell.

The housing ministry also said it will act to stop freeholders and managing agents taking “as long as they want and charging what they want” to provide leaseholders with the information they need to sell their home: a new time limit of 15 working days will be introduced and fees will be capped at £200.

Apart from this measure, the government did not announce any other plans to act on abuses affecting the owners of existing leasehold properties. Neither did ministers mention any plans to ban the sale of leasehold flats in new-build blocks.

There are an estimated 2.9 million leasehold flats and 1.4 million leasehold houses in England, with the total amounting to almost a fifth of the English housing stock.