A case for abolishing new-build leaseholds in the UK


After much prodding from campaigners about unfair leasehold practices, the government recently announced its intention to make leaseholds a thing of the past – in certain circumstances, at least.

Housing Secretary James Brokenshire revealed plans to both abolish the selling of new houses as leaseholds, as well as reducing grounds rents for all new leases to zero.

Leaseholds are a peculiar thing. Given they can last for a hundred years or more, one might assume they pose little issue to people when buying or selling a residential property. In truth, however, they can be an administrative nightmare.

From the process of renewing leasehold arrangements to abiding to refurbishment and renovation restrictions, leaseholds can be extremely difficult to manage.

In 2016, more than a quarter (24%) of residential property transactions in England and Wales were leasehold. The stats show just how widespread this form of property ownership is. And given the obstacles it can pose for leasehold property owners, I’m pleased to see the government committing to bold reform.

The current system is unduly complicated. The problem stems from the fact that owners of leasehold properties don’t in fact own them outright; effectively, they are tenants with a very long-term rental.

This means freeholders have the power to levy high charges for things such as lease extensions, service charges, maintenance costs and ground rents.

When it comes to annual ground rents, the reforms couldn’t come sooner. Controversial doubling ground rent clauses have seen as many as 100,000 homebuyers trapped in contracts which have seen this cost double every 10 years, according to the Leasehold Knowledge Partnership.

As a result, many also face difficulties when trying to switch mortgages as lenders are hesitant to grant mortgages against homes with onerous ground rent clauses. Ultimately, power has for too long been highly concentrated in the hands of the freeholder.

While the measures will only apply to new-build properties, we should not let this overshadow the relief such reforms will bring to many people across the country.

The property market is a complicated entity, and given the amount of attention placed on issues concerning Brexit, it is positive to see the government tackle an issue in need of urgent attention.

Looking to the months ahead, I am hopeful that the government (in whatever form it takes) builds on this momentum and actively looks for ways to make life easier for those trying to get on or move up the property ladder. That’s why reforms like these should be encouraged.