The government’s proposal to ban leaseholds on new build homes and restrict new build ground rents to zero has received backing inside the mortgage industry and out.
Nationwide and the Building Societies Association endorsed the move, as did The Conveyancing Association, Shelter and Labour’s shadow housing secretary John Healey.
However a spokesman for The House Builders Federation, representing housebuilders, said leasehold is the most appropriate use of asset class for flats and in some cases houses, adding that the government needs to focus on making the terms of leases fairer on consumers and builders.
Robert Stevens, head of property risk, data and strategy at Nationwide, said: “The government’s consultation is considering additional changes that would look to address unfair practices and we look forward to exploring these proposals in due course.
“We hope that this leads to better outcomes for those buying new build properties by creating a fairer marketplace.”
Nationwide stopped lending against new build properties builds with terms of less than 125 years for flats and 250 years for houses in May, while it will not lend on new builds with unreasonable ground rents – such as those doubling every five, 10 or 15 years.
Sarah Wilde, policy adviser at the Building Societies Association, said: “This action by government is very welcome.
"This is also a great opportunity to simplify the way that leasehold terms are written as currently they can be convoluted and difficult to understand. We look forward to contributing to this consultation.”
Beth Rudolf, director of delivery at The Conveyancing Association, said: “We look forward to hearing more details on these proposals and hope they will deal with the single biggest loophole, the Commonhold and Leasehold Reform Act.
“This act currently excludes leasehold homeowners from having any protection from unreasonable fees and unreasonable delays when buying, selling or simply improving their property.
“We will continue our work to find a better method of tenure for properties with shared amenities.”
The House Builders Federation felt the focus should be on leasehold terms rather than getting rid of the leasehold system altogether.
A spokesman said: “Leasehold has been used by generations of people and is a secure and safe form of tenure.
“The industry is committed to working with all parties to ensure that the terms on which leasehold homes are sold are fair and work for the homeowner.
“Buying and selling apartments on a leasehold basis is a long accepted form of ownership and provides security for people with communal facilities.
“There are instances where houses need to be sold on a leasehold basis, for instance where land has been acquired from local authorities, other public bodies or the Crown on a leasehold basis.
“HBF will work with its members to contribute to the consultation to ensure that any reforms are workable.”
Another group which spoke out in support of the proposals was housing and homelessness charity Shelter.
Anne Baxendale, its director of communications policy and campaigns, said: “Our housebuilding system is failing families all over the country, many of whom are being stuck with ever increasing charges on expensive, and often second-rate, new homes.
“While the leasehold system can help make sure new homes are properly serviced, it’s clear it has been massively abused by developers who are using this to get something for nothing.
“Ground rent charges should be transparent and fair, and it’s vital that families hit by unjust charges are compensated.”
Other politicians also gave the move their backing.
Sir Peter Bottomley, co-chair of the all-party parliamentary group on leasehold reform and Tory MP, said: “Having control and hopefully abolition of unjustified and unnecessary fees, which would apply to existing leasehold as well as future ones, then I would argue that if not covered by existing law, there should be action taken by parliament so that unfair existing terms or existing leases can be struck out as unreasonable.”
“It sounds as though the government is going beyond what was in any party's manifesto - this will be welcomed by everyone concerned for the wellbeing and welfare of leaseholders and there are more steps needed to make the dispute system work fairly and at very low cost.”
John Healey, Labour's shadow housing secretary welcomed the consultation but urged the government to put concrete legislation in place.
He said: "Labour has said for the last year that using leasehold to sell homes is unfair and unjustifiable. And at the election we said we'd end the routine use of leasehold ownership for all new homes and cap charges on 'ground rents' to stop the scam.
"The government's pledge is welcome but legislation is needed and this got no mention in last month's Queen's Speech.
"Homebuyers need legislation to ensure the end of this leasehold abuse, cap rip-off rises in ground rent and deal with existing contracts that contain unfair buy-out clauses."
