All new houses in England and Wales will have to be sold as freehold properties under ministers’ revived plans to phase out the ‘feudal’ leasehold system.
Next month’s King’s Speech, when the Government will set out its fresh legislative agenda, will include proposals to ‘restore true home ownership’ to buyers.
Promised new laws will ensure that all new houses built must be sold as freehold other than in exceptional circumstances, although new flats can be leasehold.
Ministers also plan to cap all ground rents on existing leasehold properties to a ‘peppercorn’ rate, as well as change the standard contract lease extension from 90 years to 990 years.
They also want to remove the requirement for someone to have lived in a property for two years before they can negotiate an extension.
The reforms are to be set out in a Leasehold Bill being drawn up by Levelling, Up, Housing and Communities Secretary Michael Gove.
But Labour today attacked the plans as ‘thin guel’ and highlighted how the Tories promised four years ago to axe leaseholds for new houses.
Fresh reforms are to be set out in a Leasehold Bill being drawn up by Levelling, Up, Housing and Communities Secretary Michael Gove
Promised new laws will ensure that all new houses built must be sold as freehold, although new flats can be leasehold
Leaseholders own the right to occupy their home but the building or land is owned by the freeholder or landlord
In January this year, Mr Gove committed to abolishing the ‘outdated, feudal’ leasehold system by the next general election.
His plans were later dropped amid reports of a battle between his department and Downing Street.
But, according to the Sunday Times, Mr Gove has now reached a compromise with Prime Minister Rishi Sunak over a fresh package of reforms.
Housing minister Rachel Maclean today confirmed there would be new leasehold legislation in the King’s Speech on 7 November.
‘Plans to phase out leasehold and restore true home ownership confirmed today as part of the King’s Speech,’ she posted on X, formerly known as Twitter.
‘We will restore true home ownership to millions of people and end the reign of rip off freeholders + incompetent profiteering management companies.’
The Department for Levelling Up, Housing and Communities (DLUHC) has estimated there are nearly five million leasehold homes in England, of which 70 per cent are flats and 30 per cent are houses.
The majority of flats in the private sector are leasehold – an estimated 94 per cent of owner-occupied flats and 71 per cent of privately rented flats – while around 8 per cent of houses in England are leasehold.
The proportion of new-build houses sold as leasehold rose from 7 per cent in 1995 to a peak of 15 per cent in 2016.
The proportion has subsequently fallen, and was less than 1 per cent in December last year.
Leaseholders own the right to occupy their home but the building or land is owned by the freeholder or landlord.
Many leaseholders have complained about being trapped by soaring ground rents or service charges.
They can also be liable for having to stump up large sums for repairing common areas of buildings even if they disagree.
The Government’s latest plans are set to be a final bid to try and reach a Tory manifesto commitment from the 2019 general election to implement a ban on the sale of new leasehold homes, as well as take action on restricting ground rents to a ‘peppercorn’ rate.
It is understood the King’s Speech could also include plans for a reformed commonhold system as an alternative to leasehold ownership for flats.
A new Opinium poll for the Observer showed, when voters are asked which party would be better at helping people buy their own homes, 36 per cent said Labour and only 16 per cent chose the Conservatives.
Matthew Pennycook, Labour’s shadow minister for housing and planning, said: ‘The Tories announced four years ago that they would axe leasehold for all new houses.
‘If this thin gruel is all we’re getting in the King’s Speech, leaseholders will have been failed.
‘A Labour government will fundamentally and comprehensively reform the leasehold system.’
A DLUHC spokesperson said: ‘We have already made significant improvements to leasehold – ending ground rents for most new residential leases, and will make it easier and cheaper for leaseholders to extend their lease or buy their freehold.
‘The Secretary of State has been clear that we will bring forward legislation to protect leaseholders as soon as is possible.
‘This will give them more information on their service charge costs and ensure they are not subject to any unjustified legal costs.’