Residential developers in the UK could soon be prevented from selling new-build houses under leasehold agreements, according to British media outlets. The government is considering the move as a way to prevent homeowners from being left with large fees that some leasehold homes end up having.
Currently over 4 million people in England reside in leasehold properties. Under the agreement, leaseholders pay fees to the freeholder who owns the ground on which the home is built. The leaseholder then has the legal right to occupy and use the property for a set period of time. These deals can range anywhere from 99 to 999 years.
The main problem with leaseholds is the associated fees, which include service charges and ground rents. These fees can increase by large amounts per year and make certain leasehold properties difficult to sell or maintain.
New plans put forth by UK Communities Secretary Sajid Javid would make leaseholds on new-build homes illegal and reduce ground rents, reports Sky News. The proposal would also shut legal loopholes that expose leaseholders to possession orders and rules.
“It’s 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. These practices are unjust, unnecessary and need to stop. Our proposed changes will help make sure leasehold works in the best interests of home buyers now and in the future,” says Sajid.
Leasehold agreements are nothing new having been in place in England and Wales for a long time and even found in some Asian countries like Thailand and Malaysia. However, the trend for new homes being sold as leaseholds in the UK has increased in the past few years causing problems for the housing market. The leasehold proposal will be subject to an 8-week consultation before going into effect.
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