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INDUSTRY NEWS 5 Sajid Javid proposes leasehold ban


A consultation paper has been released by Government which proposes a ban on the sale of leaseholds on new homes. Entitled ’Tackling unfair practices in the


leasehold market’ the paper considers measures to tackle what DCLG says are “unfair and unreasonable” abuses. Ground rents are renowned for rising at


high rates, often doubling every decade. This rise is inviable for many homeowners, and such rates make the property increasingly difficult to sell. Under the new proposals announced by


Communities Secretary Sajid Javid, leaseholds on new build houses would be outlawed, along with hopes of dramatically reducing ground rents. As the trend for new build housing


being sold as leasehold has accelerated in recent years, Javid commented: “Enough is enough,” calling the practices “unjust” and “unnecessary.” Labour MP Justin Madders described


the situation as the “PPI of the housebuilding industry.” The DCLG argued the terms of some


leases “were becoming increasingly onerous,” citing examples such as a homeowner being charged £1,500 by the freeholding company to make a small change to their family home, a family home which is now impossible to sell because the ground rent is expected to hit £10,000 a year by 2060, and a homeowner who was told that buying the lease would cost £2,000 but the bill came to £40,000. The proposals only apply to


England, and are undergoing an eight week consultation.


THE INDUSTRY REACTS While some commentators in the industry agree that Sajid Javid’s call for the ban is a step in the right direction towards tackling the housing crisis, others feel that a complete ban on leaseholds is going too far, and that setting out fairer rules should be considered instead. The House Builders Association (HBA) –


the housebuilding division of the National Federation of Builders (NFB) – suggested that leaseholds can still be a “legitimate model of ownership” for housing, but that


WITHOUT 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 Mark Farmer, co-founder and CEO of Cast and author of The Farmer Review


WWW.HBDONLINE.CO.UK


everything “depends on how properly this model is managed.” Rico Wojtulewicz, policy advisor for the


HBA, explained how they might work on BBC Radio 5 Live: “An HBA member in Sheffield offers 249-year leases with ground rent charges of £100 annually, increasing them by £100 every 30 years. Ground rents can be legitimate for the adoption of roads, sustainable drainage costs, maintenance of common spaces, or lighting on a site. However, there needs to be clarity in the process and fees need to be fair. Value doesn’t end at the point of sale.” The association commented: “Rather


than completely outlawing leaseholds on new-build homes, the Government ought to explore ways to make the system fairer in a manner that works for people. Looking at the model presented by HBA members would provide a good starting point.” Mark Farmer, co-founder and CEO


of Cast and author of The Farmer Review, said the plans were a “step in the right direction.” He argued that leasehold agreements and


ground rents “artificially distort a housing market that is already struggling with issues surrounding affordability.” “Banning 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. Without 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.” Ian Fletcher, director of real estate policy


at British Property Federation welcomed the Government’s consultation on the subject. He warned however that it is important


to distinguish between houses and flats, “where the use of leasehold in flats is very common, but irregular in new build houses.” “Traditional freehold owners of leasehold


flats have been aghast at the use of lease- hold in houses, which is in most cases wholly unnecessary and inappropriate. The motivation seems to have been to raise


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