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Group slams 'incredibly weak' government leasehold reforms

A specialist leasehold enfranchisement firm has branded government leasehold reforms as "incredibly weak".

In an announcement lost in the noise following Damian Green’s sacking, Communities Secretary Sajid Javid yesterday said ‘rip off’ leasehold clauses would not be allowed on almost all new homes and that ground rents on all new leases would be set at zero.

He said this would end “feudal practices” that have led millions of homebuyers to be subject to extra charges; other changes would make it cheaper and easier for existing leaseholders to buy-out their freehold.

“It’s unacceptable for home buyers to be exploited through unnecessary leaseholds, unjustifiable charges and onerous ground rent terms” said Javid, who said a formal consultation period had received an “overwhelming response” from the public seeking intervention.

Traditionally, leaseholds have been allotted to blocks of flats with shared spaces, in order to simplify ownership and split shared responsibilities.

However, Louie Burns of Leasehold Solutions has branded the measures as incredibly weak. 

“While the offer to abolish ground rents for new leases seems an attractive offer, it actually leaves existing leaseholders in a worse position because it will create a two-tier market, making new build properties with zero ground rents more attractive, while existing leaseholders will have less chance to sell their homes, as ground rents will still apply to their properties” he says.

"The announcement also states that the sale of new build leasehold houses will be prohibited 'except where necessary such as shared ownership''. We don't agree that the sale of shared ownership properties necessitates the continuation of leasehold and that other forms of ownership, such as Commonhold, would be preferable. Unfortunately the government's announcement makes no mention of Commonhold as a viable alternative that is under consideration” he continues.

"We are also disappointed that the new measures do not address the flawed valuation models used to calculate the cost of lease extensions and freehold acquisitions, which clearly favour the interests of freeholders and cause distress and financial hardship for many leaseholders. Leasehold reform can only be effective if a fair and transparent valuation system is imposed."

And Sebastian O’Kelly of the Leasehold Knowledge Partnership - one of the groups pushing for change - was cautious, saying: “Ending leasehold houses and setting new ground rents to zero are excellent first steps to stopping developers from turning ordinary people’s homes into highly complex investment vehicles for shady and anonymous investors, often based offshore.

“Sadly, there are 5m existing leasehold properties out there, all with widely differing lease terms and with ample opportunity for remunerative game playing at home owners’ expense.

“There is plenty of wriggle room here as the issue is referred to the Law Commission, where doubtless the sector and its grisly trade bodies will have their baleful influence.”

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