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Leasehold System – a ban on unjustified use of new leases for houses

Dan Ongley

4th September 2019

I recently wrote that the government had published some encouraging recommendations for reforming the leasehold system of residential ownership in England, and I promised to flesh out each of the three main proposals.

The first of these is a ban on the sale of leasehold new build houses. Unlike a block of flats where the particular way the law relating to covenants (obligations in a contract) works means that leasehold is the only show in town (Commonhold excepted), there is no tenable reason at all why a house should ever be sold on a leasehold basis.

The only reason – as it turns out – was that developers, carried away by the profits they were making almost out of thin air by selling new build flats with eye watering ground rents, saw an opportunity to do the same when developing houses. In the case of houses there is not even the fig leaf of the necessity of a lease to make ownership work sensibly. It was all about the profit(eering) and the sooner this completely unjustifiable practice is stamped out, the better.

Sadly, there is no date yet for the introduction of this reform and it is not expected to be retrospective in its effect. However, the market appears to be adjusting to the prospect of a ban. As far as I am aware, developers have stopped selling houses on long leases – because buyers (and their solicitors) are no longer content to proceed on that basis.

Author: Dan Ongley, LLP Partner and Head of Commercial 

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