Possible ban of ground rents and leaseholds on new houses in England

Plans are being set out that will ban house builders from selling new properties in England as leasehold, and could also see a restriction of ground rents to as low as zero.

Communities secretary Sajid Javid announced the proposed ban in response to the growing practice of new build properties, particularly in the north-west of England, being sold as leasehold with onerous fees attached to requesting the Lessor’s consent to alterations to the property, and provisions for the ground rent collected to increase.

Tens of thousands of homebuyers are thought to have bought properties with increasing ground rent provisions, with many deemed virtually unsaleable. Some homeowners will see their ground rents increase to £10,000 a year by 2060, while others face fees of as much as £2,500 for a letter of consent to build an extension. Some of those attempting to buy out the freehold so that they can free themselves of the onerous conditions have been quoted fees of £35,000. Some homeowners have faced threats of repossession after failing to pay ground rent demands.

Mr Javid said the practices are “unjust, unnecessary and need to stop.” The new legislation will close the legal loopholes that allow these provisions to be used, and is expected to come into force after a short 8-week consultation period. Apartments would still be sold as leasehold but the ground rents could be restricted to as low as zero.

The announcement of the proposed ban has been welcomed by a number of groups who have campaigned against the use of leasehold tenures and increasing ground rent covenants, but they have called for more action to help those people who have already completed a house purchase with the onerous covenants.

Leasehold is a very common tenure of title in Northern Ireland, and the practices that have been highlighted in England, have to date not been common in the province. Anyone purchasing a leasehold property should not necessarily be alarmed, and their property conveyancing solicitor will advise them on the title of the purchase property, including whether or not the tenure is leasehold, and if so, what ground rent amount is payable.

If you require legal advice from a property conveyancing solicitor in Northern Ireland contact Wilson Nesbitt in Belfast or Bangor by clicking here.