Government announces zero ground rent following leasehold consultation

Posted on: July 5th, 2019

Following its leasehold consultation in October 2018, the Government has announced that, going forwards, all new build houses are to be sold as freehold in a bold move to tackle unfair leasehold practices. It’s hoped that it will prevent future home owners from being trapped by onerous and exploitative lease arrangements.

The Government has also announced that ground rents on new leases are to be reduced to zero to prevent leaseholders being charged extreme fees, for which they receive no benefit.

In addition, as a means of making the home buying process cheaper, quicker and fairer, the Government will limit freeholders and managing agents to 15 working days – and a maximum fee of £200 – to provide leaseholders with the vital information they need to sell their home, which is often the main cause of delay in leasehold transactions.

As a result of these changes, the Government have instructed Homes England, who is the provider of the Help to Buy scheme, to renegotiate Help to Buy contracts, explicitly ruling out the selling of new leasehold houses, other than in exceptional circumstances. Therefore, developers will have to alter their practices in order to sell homes using the Help to Buy Scheme.

In addition, where buyers are incorrectly sold a leasehold home, which could ultimately prove difficult to sell, leaseholders will be able to get their freehold outright at no extra cost. There will therefore be no future benefit for developers to sell houses as leasehold, when in fact they should be freehold.

The Government has also announced a consultation on redress for purchasers of new build homes, and to hold developers to account, by the appointment of a New Home Ombudsman. This seeks views as to the details of the proposed legislation and how a new homes ombudsman can be delivered.

The consultation will last for eight weeks and will run until 22nd August 2019. If you would like to contribute, you may respond by completing an online survey here or by email to NewHomesOmbudsman@communities.gov.uk.

Legislation will follow as soon as soon as parliamentary time allows, but this will be a relief for some leaseholders who are unable to sell their property due to onerous lease clauses.

For more information on the future of leasehold properties, please contact Laura Bacon in the Commercial Property team.