The government has announced plans to make all new build property freehold, not leasehold. The government is still consulting on the new plans, which are not yet law. However, the proposals have so far been welcomed by campaigners, home owners and estate agents alike.
Why has the government made this decision?
Henry Wiltshire’s estate agents in Hayes explain, “Most flats are bought as leaseholds, which is understandable as the block will necessarily be owned by an individual or a company who will be the freeholder. However, many leaseholders are living in houses, not flats, which can lead to leaseholders paying a freeholder for no other reason than that it’s in the contract.”
Up until now, some buyers have found themselves trapped in expensive contracts and forced to pay sky-high ground rents to the freeholders of their properties. Some of these ground rents double every ten years or less, leaving home-owners seriously out of pocket. For many, selling the property and moving on is not a viable solution as the property is unsellable: buyers will steer clear of properties with high ground rents, and mortgage lenders will be unwilling to lend money for the purchase.
Because of legal loopholes, it has also become very expensive to extend the lease if it is about to run out, or to buy the freehold. Conservative MP Sir Peter Bottomley, who has campaigned hard to protect leaseholders, reports that some London leaseholders are being quoted £2,000 to buy their freeholds, only to be ultimately billed for a sum closer to £30,000.
How will the new freehold legislation affect the London property market?
Buyers of new build properties will be in a much more secure position. Not only will they escape potentially very expensive ground rents, but they will have a property whose lease cannot run out. This also means that they will never be stuck with a property that is hard to sell because of high costs or a short lease.
At present, the proposed legislation only covers new build. There are no proposals to protect people already living in leasehold property with expensive ground rent, or those planning to buy older leasehold property, although Communities Secretary Sajid Javid has hinted that the legislation may be extended to include people in these situations.