Posted on 11.4.17 by Tanzeela Mahboob
Government officials have claimed to be looking into plans to ban developers from selling newly built houses with leases as well as setting a minimum lease length for new flats, aimed at stopping the ‘unacceptable exploitation of homebuyers’.
With a leasehold, you own the home but you do not own the land it stands on, meaning you are obliged pay annual ground rent to the freeholder.
Developers have been caught exploiting home buyers by including escalating ground rent set to double every 10 years, potentially crippling the future value of the home.
For example, if the ground rent starts at £200 a year, after 30 years it will rise to £1,600 a year, making it not only very difficult to sell on as even if you were to find a buyer, they would struggle to find a lender willing to pay out with such a cause in place.
A recent report from the Department for Communities and Local Government (DCLG) found that 1 in 5 private homes in England are leasehold.
Around 2.8million of these are flats, which are traditionally sold as leasehold, But the concerns lie with the 1.2million houses that have leases, including 167,000 detached homes.
Selling detached homes with a lease is a practice that was practically unheard of 20 years ago, from a cynical viewpoint, would appear to serve no other purpose than to allow developers to make more money at the expense of the home buyer.
This is leaving millions of homeowners stuck with potentially undesirable conditions that may make the homes difficult to sell with the situation only getting worse, as there are no caps on these contracts, the ground rent could end up costing thousands per year.
A ban on selling new builds with a leases will be very much welcome, it will force developers to reconsider this poor practice or run the risk of building properties that very few buyers wish to buy, as well as offering leaseholders greater security for the future.
It is important to use a trusted solicitor when buying a home, be sure to ask questions regarding the tenure of the property and be made fully aware of any onerous clauses. If you are looking to buy or sell your home, our experienced residential property team can help.
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