The Government has announced a wholesale reform of the new homes market.
It will outlaw the selling of new houses as leasehold properties, cut ground rents to zero, and appoint an ombudsman to oversee complaints about new homes.
Housing Secretary James Brokenshire unveiled the swathe of reforms that will hold developers to account.
Under the reforms all new-build houses, including Help to Buy, will not be allowed to be sold as leasehold.
Brokenshire said he has also instructed Homes England to renegotiate Help to Buy contracts to explicitly rule out the selling of new leasehold houses, other than in exceptional circumstances.
Where buyers are incorrectly sold a leasehold home, he said, consumers will be able to get their freehold outright at no extra cost.
It is understood that this won’t apply to the secondhand market and the ban won’t come in for a while, as a spokesman for the Ministry of Housing and Local Government said it will require new legislation.
The Government originally planned to cap ground rents on future leases at £10 per year but now plans to set them at zero.
Brokenshire also revealed that a total of 60 developers, managing agents and freeholders – including Crest Nicolson and Keepmoat Homes – have now signed an industry pledge to free existing leaseholders trapped in onerous deals where ground rents double every ten or 15 years.
In another move to stop freeholders and managing agents taking as long as they want – and charging what they want – to provide leaseholders with the information they need to sell their home, Brokenshire said ministers will introduce a new time limit of 15 working days and a maximum fee of £200.
He added: “We are committed to taking bold action to reform the sector and will be pressing ahead as soon as parliamentary time allows – helping us deliver our promise to make the home buying and selling process quicker, cheaper and easier.”
Commenting on the announcement, Mark Hayward, chief executive of NAEA Propertymark said: “It is positive news for consumers that Government are looking at how to create an ombudsman that will cover new homes.
“We have previously raised concerns that those buying a new home directly from a developer have no access to redress, as sales directly via a hous builder do not fall under the Estate Agents Act 1979.
“Bringing new homes under the scope of an ombudsman allows for a level playing field across the entire house buying process and will ensure the selling activities that developers are engaging in are of a consistently high standard.”
The reforms were welcomed by Sebastian O’Kelly, spokesman for the Leasehold Knowledge Partnership.
He said: “The only dark cloud is that this is a policy statement at the point where the prime minister is changing.
“Let’s hope Brokenshire stays in post to see all this through.”
Comments (11)
PPI claims finally finish at the end of October and all those emails and calls from then on will be ‘Have you been stitched up on a dodgy leasehold on your new build?’. This will eventually cost the builders millions and all of it subsidised with taxpayers money via Help to Buy. More like Help to be Ripped Off.
“The Government originally planned to cap ground rents on future leases at £10 per year but now plans to set them at zero.
“Brokenshire also revealed that a total of 60 developers, managing agents and freeholders – including Crest Nicolson and Keepmoat Homes – have now signed an industry pledge to free existing leaseholders trapped in onerous deals where ground rents double every ten or 15 years.”
Will this apply to leasehold flats?
The 60 developers, etc. are all in the process of contacting leaseholders to replace the nasty doubling ground rents with almost as bad RPI ground rents.
Instead of doubling every 10 years (comparatively rare) or 15 years (much more common) the freeholders are offering to change the review pattern to match the change in RPI on every review.
The main proble with this is that the starting ground rents were already very high AND RPI generally is about 1% higher than CPI.
RPI has been described by our own government as “broken” and “not fit for purpose”.
Whilst RPI reviews are better than doubling reviews, it is still pretty bad.
“…those buying a new home directly from a developer have no access to redress, as sales directly via a hous builder do not fall under the Estate Agents Act 1979.”
Mr Hayward would be wise to #do_something about the fact that redress scheme providers and HIS OWN ORGANISATION do nothing about certain companies which DO fall under TEAA1979…
…and currently p*** all over it.
Good, as some conveyancers are so muddled (when reading – or failing to read – the CML Handbook) on the subject of doubling ground rents when clearly there is no issue.
(Don’t get me started on the few conveyancers almost paralysed with the nonsense ‘but the ground rent makes it an assured tenacy’ stance)
I agree that the AST issue is a complete nuisance and the ensuing paralysis can be a deal breaker but the wording of the 1988 Housing Act is quite clear if obviously erroneous. This issue has never been tested in Court and until it has been some legal advisors will struggle to “take a view” and advise their clients to continue with a purchase when there is such a (miniscule) risk involved.
I will agree that the trouble caused is disproportionate and that the legal advisors need to get a grip.
1) these measure are brilliant and long over due
2) they will never see the light of day
I think that the things that James Brokenshire announced are essentially a “done deal”. The promises made all seem to be sensible and I would generally comment “About blinking time!”
The problem is that it doesn’t help anyone who owns a leasehold property that isn’t a new build.
They are put to massive addtional financial burden by a system of property ownership that is jus under 100 years old and no longer fit for purpose in the modern world.
I see a horrible situation on the horizon. All those people already with a secondhand leasehold house or doubling ground rent will suddenly find themselves in unmortgageable (hence unsaleabl) properties as lenders will put them in that category. Any legislation to sort this out MUST apply to ALL existing leaseholders not just those with freeholders that sign up to the agreement. The leaseholders MUST have the legal right to rectify their position, much the same as The Leasehold Reform Housing and Urban Development Act gave them the right to extend their leases and reduce ground rents in 1993.
I agree. The lenders out there could leave people completely high and dry.
Should have never happened in the first place. Those house builders who facilitated such an unethical scheme should be ashamed.