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Government bans leaseholds on new build houses

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21/12/2017
Developers have been criticised for applying unfair leasehold terms and escalating ground rents
Government bans leaseholds on new build houses

New measures have been announced by the Government to cut out unfair and abusive practices within the leasehold system, including a ban on leaseholds for almost all new build houses.

The move comes as part of the government’s pledge to help fix the broken housing market and follows a recent consultation where there was an overwhelming response in favour of plans to tackle the unfair practices in the leasehold sector.

What’s a leasehold house?

Leasehold generally applies to flats with shared spaces, making multiple ownership more straightforward, but developers have been increasingly selling houses on these terms – adding further costs to over-stretched house buyers.

There are 1.4 million leasehold houses across England and with the number of leasehold sales rapidly growing, the new rules aim to make the leasehold market fairer.

Ground rents set to zero

Changes will also be made so that ground rents on new long leases – for both houses and flats – are set to zero.

Plus the Government will make it cheaper and easier for existing leaseholders to buy-out their freehold and there will be better information available about redress for those consumers who face the most onerous terms.

Communities Secretary, Sajid Javid, said: “It’s unacceptable for homebuyers to be exploited through unnecessary leaseholds, unjustifiable charges and onerous ground rent terms.

“It’s clear from the overwhelming response from the public that real action is needed to end these feudal practices. That’s why the measures this government is now putting in place will help create a system that actually works for consumers.”

Chris Rhodes, Nationwide’s director for products and propositions, added: “We welcome the Government’s positive measures in addressing onerous leasehold terms and escalating ground rents. We hope this encourages providers to review their lending criteria in this area and also guide homebuilders on future developments.”

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