James Brokenshire, secretary of state for housing, communities and local government, told the Chartered Institute of Housing Conference that the plans to abolish the selling of new houses as leasehold properties would prevent future home-owners from being trapped in exploitative arrangements.
It would also “put cash back into the pockets of homeowners” as “pernicious ground rents” on new leases would be reduced to zero, the minister said.
A leasehold is a method of owning property but not the land on which it stands whereas freehold leases grant outright ownership of the property and the land on which is stands.
The government has also instructed Homes England to renegotiate Help to Buy contracts to explicitly rule out the selling of new leasehold houses, other than in exceptional circumstances, to protect new home buyers from extra charges.
This will “prevent taxpayers’ money from directly supporting the unjustified sale of leasehold houses”, said Mr Brokenshire, and a total of 60 property developers have now signed a pledge committing them to freeing existing leaseholders.
On top of this, consumers who are incorrectly sold a leasehold home, which could leave them with a property that could prove difficult to sell, consumers will be able to get their freehold outright at no extra cost, the minister confirmed.
The issue of leaseholds first came to light in December 2017 when then-housing minister MP Sajid Javid, now Home Secretary, first announced the plans.
In July last year, Mr Brokenshire put further weight behind the pledge, promising to tackle "unfair and abusive" practices within the current leasehold system and cease funding of "unjustified" leasehold houses through government schemes.
Today Mr Brokenshire also announced proposals to make it easier for renters to transfer deposits between landlords when moving, a new Housing Ombudsman and measures to speed up planning applications.
Councils should be able to approve planning applications more quickly under the changes and it is hoped the new ombudsman will be able to protect the rights of homebuyers and hold developers to account.
Mr Brokenshire said: “We have long recognised that we have a responsibility to confront unfairness in the leasehold market. Last year we consulted on proposals including the leasehold house ban and ground rent reduction.
“Today I can confirm we will go ahead with our original plan to reduce ground rents on future leases to zero.”
Mr Brokenshire said the government would also legislate to ensure that in the future, all new houses would be sold on a freehold basis.
He added: “We are committed to taking bold action to reform the sector and will be pressing ahead as soon as parliamentary time allows – helping us delivery our promise to make the home buying and selling process quicker, cheaper and easier.”
Nick Morrey, product technical manager at John Charcol, welcomed the news that the government were attempting to put an end to leasehold houses.
He said: "This is good news, although its about time. This should have been done five or six years ago.
"The concept of a lease hold in a flat makes sense, but it does not sit right in terms of a house and it definitely doesn't sit well with lenders."
Mr Morrey went on to say that he hoped the government would retrospectively free those who are currently in a leasehold house where they can be subject to onerous service and upkeep charges.
imogen.tew@ft.com
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