Phil Spencer slams developers over leasehold houses

Developers have continued to sell thousands of new-build houses with leaseholds, despite a government pledge to ban the “unscrupulous” practice a year ago.

The claim is made by Move IQ, Phil Spencer’s property advice site.

Official data shows that the taxpayer-funded Help to Buy scheme subsidised the purchase of more than 30 leasehold properties a day - a quarter of which were houses - in the six months following the government’s announcement.

The claim comes after Housing Secretary James Brokenshire renewing the government’s pledge to prevent new build houses being sold as leaseholds, describing the practice as “unscrupulous and unjustified”.

The government first proposed the ban last December, after thousands of unsuspecting buyers were sold leasehold homes only for the original developers to sell on the freeholds to third parties who then vastly increased the ground rent - in some cases doubling it after 10 years.

The issue has been put on a par with the mis-sold PPI scandal. It has seen some homeowners becoming ‘leasehold prisoners’, unable to sell due to punitive charges.

In an October consultation document, the government said the practice was being phased out by developers. 

Yet Spencer’s service claims Land Registry records show that in the last year alone thousands of buyers have been sold new build houses on a leasehold basis.

The Land Registry figures show 26,024 new-build properties have been sold with leaseholds since last December’s government announcement, 2,644 of which were houses.

Separate figures from the Ministry of Housing, Communities and Local Government show that in the first six months of the year, 5,949 leasehold homes were bought with assistance from the Help to Buy scheme, of which 1,340 were houses.

Spencer says: "A year on from the government’s pledge to ban the sale of new build leasehold houses, thousands of buyers are still being allowed to sleepwalk into leasehold limbo. And in a further, ironic twist, many are even being encouraged to do so by the Help to Buy scheme.

“Millions of Britons live happily in leasehold homes. But anyone buying a leasehold property needs to do so with their eyes wide open, and should take legal advice to understand the obligations that go with owning a home this way.

“While leasehold tenure is normal for flats, the Government says it is determined to stop newly built houses being sold in this way - while at the same time offering Help to Buy incentives. These mixed messages are deeply confusing.

“When the ban comes in, there should be some redress for the thousands who have bought leasehold houses. At the very least they should be given first refusal on the freehold of their home at a reasonable rate, before it is sold on to a third party.”