The Harrison Drury Blog

What is the new government proposal for leasehold properties?

Row of Modern newly built housing developmentIn late July, Communities Secretary Sajid Javid laid out a proposal to stop new build houses being sold on a leasehold contract. The proposal is now under an eight-week public consultation period.

Our property expert Silas Heys took part in BBC 5 Live’s discussion exploring what the new restrictions could mean for consumers and what they should do. Below he takes a look at some frequently asked questions.

What is a leasehold?

Leasehold houses aren’t something new, they have been around for hundreds of years and essentially mean that leaseholders are very long-term tenants. Property owners buy the rights to occupy a property, they do not own the land, they are charged ground rent and are normally required to gain permission for any changes to the property.

Traditionally, these charges were minimal. However, in recent years, we have seen property developers acting with a commercially focused mind. Selling properties and adding in leasehold clauses with larger ground rents, sometimes doubling every 10 years.

What is the government proposing? 

The main measures that will be considered during the eight-week consultation period are:

  • The total ban of new houses being sold on a leasehold contract.
  • The payment of ground rents on homes to be restricted.
  • Closure of legal loopholes that can leave leaseholders vulnerable to possession orders.
  • Help to buy equity loan rule changes so they can only be used for “new built houses on acceptable terms”.

Is the law going to change immediately?

The proposed review of the existing laws for leasehold and freehold properties is subject to an eight-week public consultation period and the review is only of properties in England.

This is a short consultation period and it is therefore important to respond and make your views known if this could affect you. The last date for responding is Tuesday 19 September.

I am looking at purchasing a leasehold property now, should I wait? 

It may be that your new ground rent is minimal, you are perfectly happy with a leasehold property and the contract is fair, meaning it won’t cause you any trouble at all. Providing you have taken the necessary legal advice you can push ahead with your purchase.

Many leaseholders do, however, find that they are restricted in what they can do with their house. Often you will need to get consent from your landlord for simple alterations that wouldn’t normally require planning permission and you pay the landlords reasonable costs for providing this, including their legal fees.

If I bought a leasehold house 10 years ago, will this affect me?

At the moment, the proposed changes aren’t retrospective, if they are approved they will only have an impact on future purchases. The consultation will also be encouraging suggestions as to how they can help home owners who are already tied into a difficult leasehold contract.

If you are facing difficulties with your leasehold, the overview will provide a platform for you to seek redress from your housing developer or, if the situation was not made clear at the point of sale, your solicitor.

As a leaseholder, if you have legally owned your property for two years, and subject to other eligibility criteria, you may have the right to buy the freehold reversion to your house. It is important that you explore this option if you are having issues with your leasehold property. 

Each situation is unique and It is increasingly important that if you are thinking of taking action, you seek the appropriate legal advice.

For further advice on leaseholds and how to approach the proposed changes, e-mail Silas Heys, or call him on 01772 258321.

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