Builders are to be banned by the government from selling houses as leasehold in England and ground rents on flats could be cut to zero following widespread outrage over exploitative contracts.
Understandably, widespread outrage has been caused as it emerged that many houses have been sold with a ground rent which doubled at specified years during the terms of the lease. The properties which are subject to a doubling ground rent are now potentially not good security for mortgages and will be very difficult to sell on meaning many will be left with a property worth substantially less than they paid for it.However, there is currently a fundamental misunderstanding about what the issue is. The media are conflating ground rents and leaseholds. Selling a house on a leasehold title is a time-honoured way of setting up residential developments and indeed there are many developers who do not charge extortionate ground rents despite selling leasehold houses.If the government want to prevent these unreasonable ground rents in the future, they only need to regulate those rental rises. Abolishing leasehold houses is akin to using a sledgehammer to crack a nut and removes a sometimes vital option from developers who may need the legal nuances of leasehold to facilitate a development in the first place – not a good look-out for a country in the midst of a housing crisis.