Plans would end ground rent hikes and protect buyers from legal loopholes

The government has announced what it calls 鈥渞adical new proposals鈥 to stamp out abuses of the leasehold system for newly-built houses.

Consumers have been outraged by 鈥榙oubling clauses鈥 on leasehold properties they had bought which allowed for ground rent to soar .

The government鈥檚 plans, which would apply to England only, would deliver a 鈥渇airer, more transparent鈥 system, according to communities secretary Sajid Javid (pictured).

Stung by fierce criticism surrounding some of its lease provisions earlier this year, to compensate buyers of its homes, although this would only apply to buyers who had acquired their home directly from the company; those who bought 鈥榮econdhand鈥 would not benefit. The firm admitted certain leases contained clauses which saw ground rent on properties it built doubling every 10 years until the lease鈥檚 50th year, and had caused some of its customers 鈥渦nderstandable concern鈥.

Taylor Wimpey declined to say how many properties were affected but said it would bear the cost of the difference between the doubling rent clause leases and newer 鈥 and much cheaper 鈥 ground rent arrangements.

Following an eight-week consultation which begins today (Tuesday), Javid plans to ban new build houses being sold as leasehold and restricting ground rents to as low as zero.

鈥淚t鈥檚 clear that far too many new houses are being built and sold as leaseholds, exploiting home buyers with unfair agreements and spiralling ground rents. Enough is enough,鈥 he said. 鈥淭hese practices are unjust, unnecessary and need to stop.

鈥淥ur proposed changes will help make sure leasehold works in the best interests of homebuyers now and in the future,鈥 he added.

The government said the proposed prohibiting of future houses being sold as leasehold would apply to all houses apart from a few exceptional circumstances where leasehold was still needed, such as houses that have shared services or are built on land with specific restrictions.

Javid鈥檚 proposals include setting ground rents to zero levels; closing legal loopholes to protect consumers, such as leaving 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.

Mark Farmer, co-founder and chief executive of Cast, labelled the government鈥檚 plans as 鈥渁 step in the right direction for fixing our broken housing market鈥.

Farmer said that leasehold agreements for houses and the subsequent ground rents that are charged, artificially distorted a housing market already struggling with issues surrounding affordability.

鈥淏anning developers from selling new-build houses on leasehold agreements to drive additional revenue may help recover some of the confidence that the public has lost in the sector.

鈥淲ithout action on this and the parallel housing quality debate there is a real risk of buyers starting to move away from new build stock which would be a disaster for housing supply.鈥

In a statement Taylor Wimpey said: 鈥淲e announced last year, following a review, that all future sales of Taylor Wimpey houses on new developments commencing from 1 January 2017 will be on a freehold basis, except where we don鈥檛 own the freehold.

鈥淲e have also introduced a scheme to help Taylor Wimpey customers who bought homes from us with a 10-year doubling ground rent clause. We are working hard with the freeholders to convert our customers鈥 doubling leases at our expense to ones which resolve concerns around how easy it is to sell or get a mortgage on these properties.

鈥淭aylor Wimpey has set aside 拢130m to cover the cost of converting the leases on our customers鈥 behalf.鈥

Meanwhile the Home Builders Federation (HBF) said leaseholds had been used by generations of people and were 鈥渁 secure and safe form of tenure鈥.

In a statement it went on: 鈥淭he industry is committed to working with all parties to ensure that the terms on which leasehold homes are sold are fair and work for the homeowner. Buying and selling apartments on a leasehold basis is a long accepted form of ownership and provides security for people with communal facilities.

鈥淭here are instances where houses need to be sold on a leasehold basis, for instance where land has been acquired from local authorities, other public bodies or the Crown on a leasehold basis. HBF will work with its members to contribute to the consultation to ensure that any reforms are workable.鈥