Figures suggest developers are continuing to sell leasehold homes despite upcoming ban
A year on from a Government proposal to ban new build leasehold houses, over 2,600 have been sold, with many sales funded by the taxpayer-backed Help to Buy scheme, it is claimed.
It means that some buyers may inadvertently be in a legal limbo as the properties are hard to sell or remortgage and the current proposed ban will not be retroactive, TV property expert Phil Spencer has warned.
Analysis by the property advice site Move iQ reveals more 30 buyers a day are using the Help to Buy scheme to purchase new build leaseholds despite developers being aware of the upcoming ban and the Government describing it as an unscrupulous practice.
Official data shows that the taxpayer funded Help to Buy scheme subsidised the purchase of more than 30 leasehold properties a day, a quarter of which were houses, in the six months following the Government’s announcement.
It comes after the Housing Secretary James Brokenshire renewed the Government’s pledge to prevent new build houses being sold as leaseholds, describing the practice as ‘unscrupulous and unjustified’.
The Government first proposed the ban last December, after thousands of unsuspecting buyers were sold leasehold homes only for the original developers to sell on the freeholds to third parties who then vastly increased the ground rent, in some cases doubling it after 10 years.
The issue has been put on a par with the mis-sold PPI scandal. It has seen some homeowners becoming ‘leasehold prisoners’, unable to sell due to punitive charges.
In an October consultation document, the Government said the practice was being phased out by developers. Yet Land Registry records show that in the last year alone thousands of buyers have been sold new build houses on a leasehold basis.
The Land Registry figures show 26,024 new build properties have been sold with leaseholds since last December’s Government announcement, some 2,644 of which were houses.
Separate figures from the Ministry of Housing, Communities and Local Government show that in the first six months of the year, 5,949 leasehold homes were bought with assistance from the Help to Buy scheme, of which 1,340 were houses.
Across England, 18% of homes, some 4.3 million, are leasehold properties. Since Help to Buy launched in 2013, some 45,367 leasehold properties have been sold through the scheme, 39% of which were houses. The scheme has been most popular in Northumberland, Cornwall, the South West, North West and central London.
‘A year on from the Government’s pledge to ban the sale of new build leasehold houses, thousands of buyers are still being allowed to sleepwalk into leasehold limbo. And in a further, ironic twist, many are even being encouraged to do so by the Help to Buy scheme,’ said Phil Spencer, co-founder of Move iQ.
‘Millions of Britons live happily in leasehold homes. But anyone buying a leasehold property needs to do so with their eyes wide open, and should take legal advice to understand the obligations that go with owning a home this way,’ he pointed out.
‘While leasehold tenure is normal for flats, the Government says it is determined to stop newly built houses being sold in this way while at the same time offering Help to Buy incentives. These mixed messages are deeply confusing,’ he explained.
‘When the ban comes in, there should be some redress for the thousands who have bought leasehold houses. At the very least they should be given first refusal on the freehold of their home at a reasonable rate, before it is sold on to a third party,’ he added.