As plc housebuilders ABANDON ground rents, buyers should NOT buy any new leasehold flats with ground rents.
Five of the UK’s biggest housebuilders have scrapped ground rents on new flats, in a victory for future homeowners and campaigners who have long argued that the charges allow leaseholders to be exploited. Thousands of homeowners have been hit with inflated management fees and ground rents that rose by hundreds or even thousands of pounds a year on new-build flats and houses.
This is confirmed, although LKP appears to have pre-empted any sector-wide announcement by the housebuilders.
Barratt London, Countryside Properties plc, Bellway, and Taylor Wimpey have confirmed to the Independent that flats will be sold without ground rents. The influential Berkeley group, which builds prime Thames riverside flats, has not responded to LKP, but has notified buyers that new leases will have zero ground rents.
The move comes from developers as their reputation is shredded over the escalating cladding scandal, which may see a generation of first-time buyers wiped out owing to build defects that had nothing to do with them.
The Grenfell inquiry is also uncovering shocking evidence of failings in the housebuilding sector and government regulators, which may result in criminal charges.
Under these circumstances, a would-be purchaser of a £650,000 flat with ground rents of £550 at developer Strawberry Star’s Bronze site in Wandsworth, south west London, has contacted LKP for advice on whether to proceed.
Our advice is not to do so. No one should be buying new build properties with ground rents.
As plc housebuilders abandon ground rents, the entire future of leasehold sector is open to question.
The decision hugely increases the ability of government to reform the sector, pushing an open door to advance the case of commonhold property tenure for flats, which is the norm outside England and Wales – the only jurisdictions with widespread use of leasehold.
It also means that the Law Commission’s reports on reforming the leasehold sector can now be adopted without the sector defending the income streams of ground rents, which LKP has estimated to be worth annually £300 million – £5 million to housebuilders.
The government has been long committed to reforming leasehold by setting new ground rents at zero and banning the unnecessary wealth-eroding leasehold houses (which have largely been spurned by consumers).
LKP wishes no ill to Strawberry Star or its Bronze site, but it would be most unwise for anyone to purchase a new build property with ground rents when plc housebuilders are at last acknowledging that they were unjustifiable and have abandoned them.
The open question now is: what about the millions of leaseholders who were sold properties with ground rents (some as recently as last week)?