house prices

Ground rent scandal continues as leasehold house sales soar

The government is coming under increased pressure to publish its report on leasehold practices by July after it has emerged that the number of houses sold under leasehold agreements shot up in 2017.

Last year, news broke of the ground rent scandal that has seen thousands of homebuyers trapped in new-build houses where the developer contracts include spiralling costs, with some even setting clauses that mean ground rents double every 10 years and can cost as much as £200-£400 a year from the outset.

Other issues arising from this new type of leasehold trend include homeowners reportedly being charged £100 for every letter answered by the freeholder, plus fees of as much as £2,500 to gain permission from the freeholder to build a conservatory.

Now, new statistics have revealed that 15.6% of all newly built houses – as opposed to flats or maisonettes, which are often sold on a leasehold basis – were sold last year as leaseholds. The figures from the Office for National Statistics (ONS) show that this number has risen from 9.4% five years ago, and could indicate that developers are trying to sell as many leasehold new-build houses as possible before new government rules come in.

Government changes could set back reforms

Sebastian O’Kelly, a trustee at the Leasehold Knowledge Partnership charity, said: “There’s been a disgraceful exponential growth in the sale of new leasehold properties in recent years.

“Housebuilders have cheated their former customers by selling them tenancies which provide a considerable income for the anonymous speculators who own the freehold.”

Since the scandal broke, the government has been scrutinising the current legislation on leases as it considers introducing major changes to the system, but after Sajid Javid was replaced as the Secretary of State for Housing by James Brokenshire this week, many worry that the reforms will be put on the backburner.

Louie Burns, managing director of Leasehold Solutions, said: “We need clarity and action from the government, and this issue cannot be allowed to drift. I therefore urge the government and the new Housing Secretary, James Brokenshire, to make sure it sticks to its timetable and publishes its eagerly anticipated report on leasehold before the summer recess. This will signal its intent to reform this corrupt system, and put freeholders on notice that the gravy train is heading towards the buffers.”

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