AMs demand ban on new-build leaseholds



(Title Image: lovemoney.com)

The Issue

When you buy a property there are broadly two types of contract/purchase. Firstly, freehold – where you own the land the property is built on outright. Secondly, there’s leasehold – where the land the building is built on is “rented” (ground rent) from a leaseholder usually over very long terms like 999 years.

Leaseholds used to be offered at “peppercorn” rates (i.e. £10 a year). Increasingly, new-build houses (leaseholds make some sense for apartment blocks) are sold under leaseholds which come at a high price (usually said to be for communal maintenance, but often simply profiteering) and sometimes include clauses which dramatically increase the ground rent over time, making it far more difficult to sell a home on.

There’s a useful summary that goes into the issues in a bit more detail from the Assembly Research Service (link).

The Motion

The Senedd:

  • Recognises that leasehold residential contracts continue to represent a significant proportion of new build properties in Wales.
  • Notes that leasehold contracts are often offered on disadvantageous terms.
  • Notes that leasehold home-owners have little protection from unreasonable fees and unreasonable delays when buying, selling or improving their property.
  • Notes the UK Government’s proposed ban on the sale of new-build leasehold properties in England.
  • Believes the Welsh Government should abolish leasehold residential contracts in Wales.

Key Points

Mick Antoniw AM (Lab, Pontypridd)
For (the motion): It’s a rip-off.

  • There are an estimated 200,000 leasehold property owners in Wales.
  • Leasehold is a “relic from the 11th Century” where “land meant power”; now it means homeowners face uncontrollable costs and a lack of control over what they can do with their own property.
  • Constituents have had their leaseholds sold multiple times in a calendar year and seen the charges increase by as much as 100% overnight.
  • Leaseholders have little protection from unreasonable fees and face delays in buying, selling and home improvements; buying a leasehold to turn it into a freehold can cost tens of thousands of pounds.

Janet Finch-Saunders AM (Con, Aberconwy)
For: People need to be warned.

  • Aberconwy has the highest proportion of new-build leaseholds as a total of all new-build property sales at 77%.
  • Leasehold does make sense to an extent for apartments, but it’s increasingly used for new houses too.
  • Solicitors and conveyancers should do more to point out to home-buyers that they might be signing up to a leasehold with unfavourable terms.

Lynne Neagle AM (Lab, Torfaen)
For: It can hit social housing tenants too.

  • Leaseholders who’ve bought former council houses (i.e. in a council housing stock transfer) often face large bills to bring them up to standard and pass costs onto social housing tenants.
  • A mandatory fund should be established that all leaseholders pay into to cover the cost of big repairs and spread it over a longer time.

Sian Gwenllian AM (Plaid, Arfon)
For: Experience of constituents.

  • A leasehold for a retirement flat complex in her constituency was sold to a company based in the Channel Islands. They redecorated the flats at a cost of £100,000 – “shoddy work” – and passed the cost onto the residents.
  • Increases in ground rent are often hidden in the small print and can sometimes double every 10 years – it gets to a point where it becomes impossible to sell a property due to the ground rent.

David Rees AM (Lab, Aberavon)
For: Third-party management companies fleece residents.

  • The assumption that leasehold properties are sold at a lower price than freeholds is “incorrect” because it doesn’t factor in the “frightening” increases in ground rent.
  • Housebuilders pass on leaseholds to third party companies without telling residents, so the residents end up fleeced by management companies.

Gareth Bennett AM (UKIP, South Wales Central)
For: People need to be more aware of the differences between freehold and leasehold.

  • Miners homes in the 1950s often came with unaffordable leases, so the issue isn’t new.
  • People who live in apartments pay service charges, so why should they pay ground rent on top of that?
  • Many first-time buyers lack the right know-how when buying a property; it’s an education failing.

Jane Hutt AM (Lab, Vale of Glamorgan)
For: Give leaseholders the right to manage their own properties.

  • Many homes built as part of the Barry Waterside regeneration project are leasehold yet are still eligible for Welsh Government Help to Buy assistance.
  • Leaseholders should be given a “right-to-manage” to take control of the management of their own buildings.

Shadow Housing Minister, David Melding AM (Con, South Wales Central)
For: There’s cross-party support for a change.

  • A law change shouldn’t be ruled out as he wasn’t sure everything can be done without legislation; clearly, there’s cross-party support for the Welsh Government to act.

Welsh Government Response

Housing & Regeneration Minister, Rebecca Evans (Lab, Gower)

  • Not all leasehold transactions are inappropriate (i.e. flats, when managed appropriately).
  • She wants to put an end to the inappropriate use of leasehold contacts for new-build houses – there are a small number of legitimate reasons for a leasehold, such as on land owned by certain bodies with an interest in it like universities or the National Trust.
  • Leaseholders should always have the first option to buy a lease, not third-parties.
  • Research has been commissioned into some of the more complex issues around buying and selling and how existing leaseholders can be better supported.
  • She doesn’t believe there’s a need for a new law at this time (mainly in order to act quickly), but it could be a future option.

Vote

Michelle Brown AM (UKIP, North Wales) voted against, while the cabinet, ministers and Suzy Davies AM (Con, South Wales West) abstained.

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