Leasehold new build properties outlawed, government announces

Prospective purchasers of new build properties across the country will be breathing a sigh of relief today, as the Secretary of State for Communities, Sajid Javid, announced plans to ban the sale of leasehold houses by developers.

In many areas, particularly in the North West of England and North Wales, it has been commonplace over recent years for developers to sell newly built houses as leasehold properties. On the face of it, a buyer would ordinarily expect a house to be freehold (and a flat to be leasehold), but a number of recent consumer reports have suggested that buyers of new build houses have been unexpectedly left with a leasehold property and rising ground rents.

It appears to have become standard industry practice in some areas for developers to sell houses with a 999 year lease, which is often confused as being “as good as freehold”. Where a lease reserves ground rent payable to the freeholder however, the effect is that the buyer will be paying rent with no benefit to themselves, possibly for the entire term of the lease. Often, that rent is stated to double every ten years, meaning that a mere £100 annual ground rent in the first year would be £1,600 after 40 years. After considerable pressure to reform this area, Mr Javid has today announced plans to ban ground rent on new build properties with long leases and to work alongside the Law Commission to make the process of extending a lease or purchasing a freehold interest considerably easier.

It remains to be seen whether this will result in a series of retrospective claims against developers and indeed the solicitors who acted for any such buyers, and Meaby&Co will be following these developments with interest.

If you are looking to purchase a new build property, or have recently purchased a new-build leasehold house, please contact Andy Roscoe at Meaby&Co for advice: andy@meaby.co.uk or call 020 7703 5034.

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