The government has announced a crackdown on unfair and abusive practices within the leasehold system which looks to include a ban on almost all leaseholds for new build houses, and a zero ground rent on long residential leasehold flats. It is also thought that the government will introduce measures to make it easier and fairer for leaseholders to acquire their freeholds from their landlords.
The Leasehold Reform Housing & Urban Development Act 1993 and the Leasehold Reform Act 1967 before it gave leaseholders the right, subject to certain requirements, to extend their leases by a prescribed term or to compulsorily acquire the freehold of their building. However, a booming property market, particularly in London and the South East, has meant that the premiums being paid to landlords and the costs of exercising these rights has become prohibitive for many leaseholders.
With mortgage lenders becoming increasingly risk averse and raising the bar on the minimum lease terms they will accept, being the owner of the diminishing asset which is their lease is becoming an expensive business.
The Communities Secretary, Sajid Javid said:
“It’s unacceptable for home buyers to be exploited through unnecessary leaseholds, unjustifiable charges and onerous ground rent terms. It’s clear from the overwhelming response from the public that real action is needed to end these feudal practices. That’s why the measures this government is now putting in place will help create a system that actually works for consumers.”
The measures proposed by the government follow a recent consultation and plans set out in the housing white paper and will be followed by legislation in the coming months/years. This promises to be an interesting time for leasehold reform, a time which many will argue is very long overdue. How far the government will go in changing leasehold practices remains to be seen, however the appetite for change to the leasehold system in England grows more and more demanding and is a topic which will not go unaddressed for very much longer.
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