Conveyancing groups welcome new government laws on leaseholds
There’s been a trend in the new housing market over the past few years for builders to sell homes on a leasehold basis rather than freehold.
Generally, a freehold is a more common way of buying a property, and it means that as well as the house, you also own the land it’s on.
Leasehold, however, is different.
Usually used when buying a flat or apartment, the land is owned by a leaseholder who usually charges a yearly fee for ground maintenance. It works well in some cases where there could be multiple people occupying the land (such as in a flat), but in recent years they had become more common for new build houses, and maybe for the wrong reasons.
There’s been a trend over the past few years for developers to sell a house on a leasehold, telling the occupiers that the freehold interest can be bought for a small fee in a few years. However, many have found that when enquiring to purchase, the fee has risen as in the meantime the developer has sold the freehold to an investment firm.
Sometimes these firms have been asking for much more than the original price, sometimes many thousands of pounds.
This has come as a shock to the householders, but for developers, it has been lucrative, with The Leasehold Knowledge Partnership campaign group estimating that building firms make £300 million to £500 million a year from the sale of ground rent agreements to investors.
So now the government has acted, and these types of deals are to be banned.
This has been welcomed by the Conveyancing Association, and director Beth Rudolf said: “We are delighted to see the Government responding to such a significant weight of evidence from leaseholders and stakeholders in the property industry, and is producing proposals intended to prevent additional homeowners getting caught by escalating ground rents and unreasonable consent fees.”
Hopefully, this will now make owning a home a much less complex, and cheaper option for many buyers.