Government gunning for builders in leasehold reform paper

  • 25/07/2017
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Government gunning for builders in leasehold reform paper
Developers are under fire for leasehold practices as the government reveals plans to tackle unfairness in the housing market.

In today’s consultation: Tackling unfair practices in the leasehold market, the government said the percentage of residential new build leasehold sales has risen significantly over the last 20 years.

Land Registry figures show that leasehold made up 43% of all new-build registrations in England and Wales in 2015, cagainst 22% in 1996.

While some of this is from the rise in new-build flats, government said it believes developers are selling on a leasehold basis to create an income stream from the ground rent or generate additional funds from later selling the freehold. It does not believe developers are passing the discount there should be on a leasehold option to consumers.

The government said it intends to ban leasehold new build homes except where there is good reason. It highlighted times leasehold is used, such as on National Trust or Crown land, in retirement villages and in Garden Villages.

Developers now have eight weeks to respond, along with other parties. Government has asked for views on the impact a new-build leasehold ban would have on supply, as well as whether exceptions are justified.

Leasehold houses are more prevalent in the North of England. It is particularly common practice in parts of Cheshire, Greater Manchester, Lancashire and Merseyside, but not limited to these parts of the country.

“Developers and landowners argue that restricting their ability to sell on freehold interests to third party investors will result in increased house prices, in order to compensate developers for selling the freehold interest to the purchaser, and will reduce choice,” said the consultation.

“The Government is not convinced of these arguments.”

Other measures proposed include ending Help to Buy support for leasehold new builds and limiting ground rents.

“Developers are increasingly selling leasehold properties with shorter ground rent review periods, often every ten years. There have been reports in the media of leaseholders facing onerous and unsustainable ground rents due to clauses in leases that permit ground rents to double every decade,” the consultation added.

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