Leasehold properties have been vilified in recent months as confused tenants accused residential property developers of mis-selling the homes as ‘virtual freeholds.’
Hundreds of developments have suffered from housing developers selling leasehold properties, only to then resell the land onto a third party management companies that are able to set exorbitant ground rents and charge home owners ridiculous amounts for the freehold title.
Now, James Brokenshire, Secretary of State for Housing, Communities and Local Government is set to audit and consider what property the Help to Buy finance is used to buy.
In particular, the Government are focusing on the Equity Loan Scheme. It may ban first time buyers (FTBs) from purchasing leasehold property using the scheme because of anxieties that the home buyers will imprison themselves in a quagmire of ground rent.
James Brokenshire, Secretary of State for Housing, Communities and Local Government, said: “We will reflect carefully on what we’re seeing in the market to ensure that as we look to a post-2021 position, and we’ve made no decisions over this as yet, as to what is needed to support that sense of home ownership, of first time buyers, of getting people onto the housing ladder, and what we need to do next to ensure that that vision of home ownership is felt by more people.
“It’s important that we do take action on some of the practices that we have seen, and I think the market has responded to the firm messages we’ve given, for example, over the use of leasehold houses.
“I just don’t think that leasehold is needed other than in exceptional circumstances and that practice needs to end.”
Whilst the Help to Buy finance is only secured until 2021, the Government’s careful consideration of the types of property open to the scheme may save many people from leasehold concerns in the future.
Will this restriction create a negative impact on the housing market? Are leasehold new builds being unjustly criticised? What will this mean for conveyancers?
3 Responses
So the Secretary of State doesn’t seem to trust conveyancers to warn buyers sufficiently about the dangers of leasehold.
With the number of homes which have gone through the conveyancing process and got into the supply chain despite obscenely escalating ground rents, he may have a point
We do alert clients, but all buyers are focused on is “I want this house/flat”. Pretty much everything else passes them by, sadly.
Hitting the developers where it hurts, by actually affecting their ability to shift units, may well help.
I would be in favour of HTB for leasehold continuing where the freehold was transferred to a company owned by the leaseholders. This used to be fairly standard and is by far the best way of dealing with a block of flats.
The ultimate goal should be to remove leasehold in its entirety. Its an archaic feudal practice, modeled for the titled gentry who have had 900 years of this nonsense to their benefit. The recent addition of corporate professional landlords just take advantage of the legislation, highly weighted in the favour of the freeholder.
In the interim, it is time to strip all the incomes out of leasehold (and schemes supporting this) in the residential dwelling markets, including sub leases of housing providers who are also subject to onerous terms.
Conveyancers know very well that the house builders channeled buyers into sales with their own conveyancers. They knew the malpractices but said nothing.
You all should be embarrassed at this backward attitude of leasehold in this country where much smaller countries such as Scotland threw this nonsense out in 2004 and Ireland did so in 1978. Worldwide the case is proven it is not required. But why would you all halt a nice valuable income stream for your practices?