This month we ask…
Are you in favour of an outright ban on leasehold new build homes?
Maria Harris, director of retail mortgages, Atom Bank
Anything which gives better outcomes and greater transparency for customers will always be a yes from me.
The ban is designed to tackle some of the leasehold practices which customers have felt to be unfair, confusing or in some cases quite vexing for new build house owners.
The new measures are intended to ban leaseholds on almost all new build properties, will allow ground rents to be set to zero on long lease properties and will make it much easier for existing leaseholders to purchase the freehold on their home.
With many new builds being bought by first-time buyers, who are often unaware of the difference between freehold and leasehold and what it could mean for the future ability to sell and remortgage their home, it’s no wonder that customers have found themselves bewildered.
We’ve seen examples where ground rents have been set to double every 10 years, meaning that the costs can quickly become restrictive, or where the lease is set up without sufficient time remaining at the end of the mortgage term to meet a lender’s criteria. This can make it especially difficult when it comes to selling your home or arranging a remortgage.
Making it easier for existing homeowners to buy their freehold will help tackle the issue where the company which owns the lease is no longer the original developer.
Where the new owner is an overseas company it can add additional complexity and cost to the process of trying to buy yourself out of the leasehold.
Under leasehold law, you must have lived in your home for two years to have the right to force the owner to let you buy the freehold, but if the owner isn’t obvious or easy to contact, it can be a barrier to what should be a homeowner’s right.
The ban will benefit most customers who are looking to buy a new build house by ensuring they purchase the freehold outright and have clarity about what they own and the future costs, thereby creating a fairer and more transparent housing market.
Tom Chance, director, National Community Land Trust Network
Let’s get one thing straight: leaseholds and ground rents that fleece and entrap homeowners are not acceptable and the government should put measures in place to put these dodgy tactics to an end.
But a blanket ban is not the answer. It is wrong to dismiss all leasehold arrangements as unfair and abusive.
Increasing numbers of community land trusts are being set up in response to the housing crisis. They are building homes that people can rent or buy at rates that are genuinely affordable in their local area. Leasehold is a strong mechanism for communities to limit the price of homes they sell to affordable levels, now and for future buyers.
There are around 300 CLTs in England that have built over 800 homes, most in the last three years. One third of these homes have been sold under leasehold to preserve affordability, and understandably, communities want to carry on using this approach. CLTs also sometimes lease their land or homes to a housing association.
CLTs are responsible freeholders. They must exist for the community’s wellbeing. Anybody in their area can join. They also have to be not-for-profit, so ground rents just cover their costs.
Co-housing is a related approach where neighbours share certain facilities, like a common house and gardens, and they often use leasehold to structure this approach.Banning these ethical uses of leasehold doesn’t make sense. Alternatives, like estate charges and covenants, are less workable.
The government has recognised the potential of community-led housing and has recently launched the £163m Community Housing Fund to support its growth. A leasehold ban could strangle the programme.
Community-led housing, be it a CLT, housing co-op or co-housing development, is growing because the housing market is failing. The motivation isn’t profit, but overcrowded houses; not being able to live in the area you were brought up; second-home ghost towns; village shop and school closures; a fear of loneliness.
I’m hopeful that community-led housing developments will be made exempt from the bans.