According to a press release from the Ministry of Housing Communities and Local Government on 27 June 2019, the Communities Secretary has announced plans to abolish the selling of new houses as leasehold properties and reduce ground rents for new leases to zero in an attempt to “tackle unfair leasehold practices and prevent future home-owners from being trapped in exploitative arrangements”.

In addition, a maximum fee of £200 will be imposed on freeholder and managing agents for providing the information required by leaseholders for their buyers when selling their homes. There will also be a time limit of 15 working days for providing this information so as to help make the home buying process “quicker, easier and cheaper”. It is unclear though, whether the same fee cap and time limit will apply to management companies that maintain common areas used by freehold properties. It also fails to address the often exorbitant fees buyers have to pay to managing agents following completion of purchases.

The Secretary of State has also instructed Homes England (formerly the Homes & Communities Agency) to renegotiate Help to Buy contracts to explicitly rule out the selling of new leasehold houses, other than in exceptional circumstances.

It was announced that buyers who were “incorrectly” sold leasehold homes on terms that could ultimately make them difficult to sell will be able to get their freehold outright at no extra cost.

Whilst these measures demonstrate the government’s commitment to ensuring “decent and fair housing for the people and communities that need them”, they are dependent on suitable legislation being passed. The Secretary of State has confirmed that the government “will be pressing ahead as soon as parliamentary time allows”. As such, it is unclear when exactly these reforms will be introduced. It will therefore be interesting to see whether developers start adopting these changes before they are introduced by statute.

And in Other News…

The measures announced by the Secretary of State are intended to support the delivery of 300,000 new homes a year by the mid-2020s. To help achieve this, he has also announced the creation of an extra 19 garden villages across the country, with the potential to deliver 73,554 homes. The government will be providing £2.85 million to support these in the form of a £150,000 grant to each development to help progress the planning applications and specialist reports needed before homes are built.

Interestingly, one of the garden villages is to be a dementia-friendly community village allowing the elderly to live safely and independently in their own homes.

Whether you are a developer requiring advice as to how best to adapt your sale to be compliant with the government’s proposals, a buyer looking to purchase a new build or a leaseholder seeking to acquire their freehold title, we can assist. Contact Farleys’ residential property team on 0845 287 0939 or submit your enquiry online.