In our recent blog “Is your home leasehold with increasing ground rent?” we discussed the growing problem of homes across the country being burdened by a contract clause which allows ground rent to be doubled every 10 years.
Developer Taylor Wimpey has reviewed its lease agreements over the past 10 years and introduced a scheme to help current owners of leasehold properties.
In a further move in the right direction, Nationwide Building Society, the world’s largest building society, has developed a policy for all new-build leasehold properties that they are asked to provide a mortgage for. The new policy includes a number of safeguards to protect buyers from unfair leasehold practices which could leave them trapped in a property that becomes increasingly expensive. These safeguards include:
· minimum lease term for flats must be 125 years
· minimum lease term for houses must be 250 years
· maximum starting ground rent must be limited to 0.1% of the value of the property
· unreasonable increases such as doubling of rent at regular intervals will not be permitted
· ground rent must be reasonable at all times
If Nationwide believe that the lease terms are unfairly restrictive, they will refuse to provide a mortgage on the property. Whilst there are other mortgage providers that could instead provide a mortgage for the same lease, we are hopeful that this bold move will see other banks follow suit.
The policy will only apply to the first purchase of new-build properties (and not subsequent purchases), but could mean that such unfair practices are eventually removed altogether – especially so along with Taylor Wimpey’s review of previous leasehold schemes.
We believe that the approach of Nationwide should be commended as a positive step in the country’s current housing climate. This policy will put the buyers first and protect the purchasers of leasehold properties – removing the negative view of purchasing leaseholds and allowing fair use of leasehold properties by both developers and purchasers.
If you are considering purchasing a leasehold, whether it is a new-build or an existing property, contact our property team for expert advice and guidance on 033 0300 1103.