Yahoo Finance Leasehold crackdown for new builds - but existing owners still face £9k yearly bills
The government has announced a crackdown on leases on houses that force families to pay exorbitant ground rents and fees.
Ministers have unveiled plans to ban builders, such as Taylor Wimpey, from selling further leasehold houses in a bid to protect buyers from extortionate future costs or the possibility that their properties could become unsellable.
Annual ground rents - the charge the leaseholder has to pay the person or company that owns the freehold on a property - on flats could also be cut, following a backlash over exploitative contracts.
Sajid Javid, the Communities Secretary, said: "It's clear that far too many new houses are being built and sold as leaseholds, exploiting home buyers with unfair agreements and spiralling ground rents. Enough is enough. These practices are unjust, unnecessary and need to stop."
The Government said it will also consider what it can do to help the hundreds of thousands of existing leaseholders who face "onerous" annual payments.
Exactly how this group of homeowners will be assisted is unclear.
Earlier this year Telegraph Money spoke to one Taylor Wimpey leaseholder whose ground rent on her house began at £295 a year and is set to double every 10 years, meaning that in 50 years’ time the ground rent will be £9,440 a year.
The backlash from leasehold buyers prompted Taylor Wimpey, the quoted builder, to agree a £130 million deal to help them, saying: "In the event that we are not able to reach agreement with individual freeholders, we will continue to pursue other avenues to help our customers."
Two other buyers, Edward and Mary Hamer, discovered only after putting in an offer on their flat that a clause meant the ground rent could fast become unaffordable.
The property, built in the Eighties, initially had ground rent of £75 a year, but in 2009 this increased to 0.5pc of the property’s value, so £730 a year.
If the property's value grows to £400,000, it means the annual ground rent would rise to £2,000 – a cost that the Hamers think would deter prospective buyers.
In another example relating to a block of flats in Islington, north London, experts calculated that grounds rents starting at £250 per year per flat would grow over the term of the 999 year lease to £69 trillion, due to the effects of compounding.
Sebastian O'Kelly, of the Leasehold Knowledge Partnership, a registered charity which aims to protect vulnerable leaseholders, said thousands of leasehold flats have been sold with toxic ground-rent terms, which meant that "as many as 100,000 homes are unsellable as a result of this trickery.
"In short, plc housebuilders have been systematically cheating their own customers," he said.
LKP estimates that housebuilders make £300 – £500 million from freehold sales every year.
