With more new build properties coming on the market all the time, there has been a rise in the number of properties that are being sold as leasehold. The Law Society has claimed that ‘sensible changes’ are needed to stop what they call ‘leasehold abuse’.

The Government recently commissioned their Tackling unfair practices in the leasehold market consultation, due to concerns that new-build houses are being sold on a leasehold basis to create an income stream from the ground rent, or to generate additional income from the sale of the freehold interest after contracts have been exchanged.

 

The Law Society considers this to be an abuse of the process and outlines that new build houses should be freehold unless being on a leasehold basis should be to enable common parts to be repaired, mutual restrictions to be enforced, and rights to automatically continue when properties are sold.

 

Such abuse has come to light in recent months, with many leases of new build properties containing onerous clauses with regards to sharp rises in ground rent after a certain period.

 

The Law Society has proposed that pre-prepared information forms could tackle such abuse. This would mean estate agents providing prospective home buyers ‘standardised written information’ about the tenure, service charges, consent regime, lease length and the impact of ground rent provisions before they view a property. If the ground rent provisions are complex, valuation advice should be included.

 

The Conveyancing Association has instead proposed that Commonhold, a property ownership system created under the Commonhold and Leasehold Reform Act 2002, could tackle problems related to new-build leasehold homes.

 

Commonhold tenure came into force in September 2004, creating a new way of owning freehold properties which have communal facilities. The unit-holder owns the freehold interest in the unit and is a member of a commonhold association, which owns and manages the common parts.

 

Despite such plans being in the consultation stage, it is clear that the law on leasehold properties is in need of reform.

 

If you plan to purchase or sell any leasehold or freehold property, please get in touch with our property team on 01792 648111.