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UK government steps in to stop housebuilders exploiting leaseholds

Staff Writer |
Radical new proposals to cut out "unfair abuses" of leaseholds was announced by the UK government on Tuesday, in a major move that will damp the mood of housebuilders but deliver a "fairer, more transparent system for homebuyers."

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Communities Secretary Sajid Javid set out plans to ban new-build houses from being sold as leasehold as well as restricting ground rents to "as low as zero."

"Leasehold generally applies to flats with shared spaces, but developers ? particularly in the north west - have been increasingly selling houses on these terms," the government said in a statement. "With 1.2 million leasehold houses currently recorded in England and the number of leasehold sales rapidly growing, the government is taking crucial action to make future leases fairer."

Javid said that housebuilders are "exploiting" home buyers with unfair agreements and spiralling ground rents, and said the regulatory change will ensure leasehold works in the best interests of homebuyers.

As an eight-week consultation period gets underway, the government's proposals include setting ground rents to zero levels after claiming some have doubled each decade, closing legal loopholes that leave some leaseholders vulnerable to possession orders, and changing the rules on Help to Buy equity loans so that the scheme can "only be used to support new build houses on acceptable terms".

Ground rents are charged on all residential leasehold properties, but the government said its plans would see them reduced so that they relate to real costs incurred.

"The terms of some leases are becoming increasingly onerous to those purchasing leasehold flat or house, who often find they need to pay thousands of pounds to their freeholder to make simple changes to their homes," said the government.

The proposed prohibition on future houses being sold as leasehold will apply to all houses apart from a few exceptional circumstances where leasehold is still needed - such as houses that have shared services or built on land with specific restrictions. These proposals relate to England only.

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