Government announces crackdown on leaseholds for new-build homes

Government announces crackdown on leaseholds for new-build homes

Leaseholds on new-build houses could soon be banned under new proposals being considered by the government.

The government said that it will consult on whether to prohibit the sale of new build leasehold houses and limit the amount of ground rent that can be charged.

The consultation period will last for eight weeks, and only relates to properties in England. It will only affect properties sold in future, but the government has urged builders and developers to take action and help those leaseholders who are currently subject to unfair charges.

Why is the government cracking down on leasehold houses now?

Most flats have been sold on a leasehold basis for years and years, and the majority of owners have no issues, as leases usually run for many decades or even centuries and are subject to only a peppercorn ground rent.

However, in recent years there has been a growing trend for new build houses to be sold as leasehold, with buyers of these properties often subject to unfair charges, particularly ground rents that increase substantially over time. Around 1.2m houses in England are currently leasehold.

In some cases, homeowners have discovered clauses buried in the small print of their leases which state ground rents will double every decade, making it virtually impossible for them to sell their properties on in future as they become unmortgageable.

Nationwide Building Society earlier this year said it would no longer offer mortgages on new build properties with ground rents that double every few years, or on new properties with leases of less than 250 years for houses and 125 years for flats. The building society will only lend on new build leasehold properties if the starting ground rent is a maximum of no more than 0.1% of the property’s value. That means on a £300,000 home, the ground rent would be a maximum of £300 a year.

Homeowners may also find that they have to pay charges running into thousands of pounds if they want to make minor changes to their properties, such as putting in a new carpet.

There are also cases where owners have been told they will be able to buy the freehold for a few thousand pounds only to find that the actual cost is tens of thousands.

According to Sajid Javid, Communities Secretary, these practices are “unjust, unnecessary and need to stop.”

What if you’re affected?

If you currently own a leasehold house which is subject to unfair ground rent rises or other issues that you don’t feel were fully explained to you at the point of sale, you should contact your solicitor and the housebuilder involved.

Some developers are already taking steps to tackle some of the issues faced by new build leasehold homeowners and so may agree to help. Taylor Wimpey said it has set aside £130m to address some of the problems faced by owners of its leasehold homes, although amending clauses can be tricky if the leases have already been sold on to third parties.

If you are a leaseholder affected by rising ground rents or steep service charges, you may be able to appeal the reasonableness of these to a Tribunal. For more information about this go to

Tribunals have the power to decide how much service charges should be and can enforce restrictions preventing the freeholder from charging more than this.

To find out more about how service charges work and what your rights are, visit the Leasehold Advisory Service at

If you are in the process of buying a new build home which is leasehold and you need a mortgage, seek advice on the best options to suit your needs, and always make sure your solicitor and the developer inform you in advance exactly what charges will be payable.

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