Changes to the leasehold system in England have been confirmed by the government following a consultation that prompted 6,000 responses.
Legislation will outlaw the sale of newbuild homes through leasehold except in cases of shared ownership. Ground rents on new long leases for both houses and flats will also be set at zero.
Existing leaseholders will also be able to buy out their freehold more cheaply and easily with better information available for consumers facing the most onerous leasehold terms.
The November consultation was prompted by what Communities Secretary Sajid Javid described as “unfair and abusive practices” within the leasehold system.
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Changes apply only in England
There are 1.4 million leasehold houses and flats in England where a freeholder retains ownership of the land on which the property stands and the leaseholder pays a ground rent over the length of the lease along with monthly management charges. The announced changes will only apply in England.
Mr Javid said: “It’s unacceptable for home buyers 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.”
Right to challenge unfair service charges
The Law Commission will also be asked to support existing leaseholders who are looking to purchase their freehold or extend a lease by making the process easier, faster and cheaper. And there will be a wide review of the current support and advice that is available to leaseholders to ensure it is fit for purpose.
Freeholders will be given equivalent rights to leaseholders to challenge unfair service charges.
The move to ban the sale of newbuild homes with a leasehold will apply in all circumstances except where leasehold is required; for example, houses with shared services (such as flats) or those built on land with specific restrictions.