26 July 2017

Leaseholds should be fairer, not abolished

Sajid Javid MP, secretary of state for communities and local government, has announced plans to outlaw leaseholds on new-build homes. Leaseholders do not own the land on which their homes lie and have to pay an annual ground rent to the freeholders.

Some individuals who purchased their leasehold homes from the largest developers, found their freeholds sold to third parties. In turn, many then saw their ground rent costs increase substantially over a relatively short time period as well as experiencing very large administration costs for changes to their properties

The leasehold system has undoubtedly been abused and made life difficult for many, who have seen volume developers put profit before people.

However, the House Builders Association (HBA) – the housebuilding division of the National Federation of Builders (NFB) – thinks that leaseholds can still be a legitimate model of ownership for housing. Everything of course depends on how properly this model is managed.

HBA members are the small and medium-sized house builders, who tend to work within a 15-mile radius of their head office. They have always backed good practice and transparency by delivering leasehold properties with considerate and clearly-presented terms.

Rico Wojtulewicz, policy advisor for the HBA, explained how on BBC Radio 5 Live: “An HBA member in Sheffield offers 249-year leases with ground rent charges of £100 annually, increasing then by £100 every 30 years. Ground rents can be legitimate for the adoption of roads, sustainable drainage costs, maintenance of common spaces, or lighting on a site. However, there needs to be clarity in the process and fees need to be fair. Value doesn’t end at the point of sale.”

Rather than completely outlawing leaseholds on new-build homes, the Government ought to explore ways to make the system fairer in a manner that works for people. Looking at the model presented by HBA members would provide a good starting point.