Mortgages 

Government takes action on 'trapped' leaseholders

Government takes action on 'trapped' leaseholders

The government has launched a voluntary pledge to tackle the treatment of leaseholders in the property industry, including those trapped in "unfair and costly" deals. 

The pledge, announced yesterday (March 28) by communities secretary James Brokenshire, has so far been signed by more than 40 property developers and freeholders.

Signatories have committed to abolishing "doubling clauses" which can result in ground rents increasing over a short period of time and to changing the terms of leases for those affected. 

The government also announced plans to close the "legal loopholes" which mean leaseholders who challenge high fees and hikes in service charges in court risk paying a landlord's legal fees, a rule which applies even if the court rules in the leaseholder's favour. 

The government intends to consult the industry on whether these changes should also apply to existing leases.

Mr Brokenshire said: "Since becoming communities secretary, I have repeatedly made clear my ambition to end those exploitative and unfair leasehold arrangements that have no place in a modern housing market.

"The new industry pledge - signed by leading freeholders and property developers - will further support existing and future leaseholders by protecting them from onerous fees.

"It’s great news that leading names such as Taylor Wimpey and Barratt Developments have already signed up to the pledge, and I want to see others who have not yet signed up do the right thing."

In recent years an increasing number of new build properties have been sold on a leasehold basis, with unsuspecting buyers subsequently being caught out by clauses which led to large bills and a rise in ground rent.

In July last year Mr Brokenshire pledged to tackle unfair practices within the current leasehold system while confirming government schemes would no longer be able to fund "unjustified" new leasehold houses. 

Then in October the Ministry of Housing, Communities & Local Government launched a consultation on how to implement the government's reforms to the leasehold system in England, something which was first promised by former communities secretary Sajid Javid. 

The consultation closed in November but was plagued by errors, with lobby group the National Leasehold Campaign claiming leaseholders were losing confidence in the process.

The government re-opened the consultation in response to calls from the NLC, offering leaseholders to re-submit their views.

Commenting on the government's voluntary pledge, housing minister Heather Wheeler MP said: "We want to make sure we have a leasehold system where people are able to challenge exorbitant rates and high service charges.

"It is unacceptable that the burden of legal fees – potentially running into tens of thousands of pounds – is preventing people from seeking justice.

"The plans announced today will stop leaseholders from picking up the tab for unjustified legal costs – creating a housing market that truly works for everyone."

Matthew Jupp, principal of mortgages policy at UK Finance, said: "This announcement is a positive step for customers that should deliver better outcomes for both existing and future leaseholders.