Leasehold houses
Over recent decades, England and Wales have witnessed developers selling new houses with a lease which could have been sold freehold. In many cases, consumers were often not aware of what owning a house on a lease would involve.
	The Government announced on 21st December 2017 it would ban the practice, and changes to Help to Buy, and the Leasehold reform (Ground Rent) Act 2022 have already made steps to reduce the prevalence of new leasehold houses coming onto the market. Government consulted twice on details of the ban, including which sites and individual units would qualify for an exemption (please refer to the ‘Related documents’ section for the links).
	These measures put a restriction on the grant of a new long lease of a house on a legislative footing.
	From the point of commencement, under provisions in the Act all new houses have to be sold as freehold, unless the seller can demonstrate they are a ‘permitted lease’. The permitted leases are included in Schedule 1.
	Where vendors, mostly new house developers, are proposing to sell a permitted lease, provisions in the Act require them to be explicit during the marketing and sale process that they are selling a leasehold house and clearly evidence why the lease is permitted.
	Specifically, the restrictions require the following steps:
Step 1: Marketing: If a developer is advertising a new lease on a house, they need to declare it as part of standard ‘permitted lease information’ in their marketing. If they do not, they can be subject to a financial penalty.
Step 2: Pre-sale: 7 days before the lease is granted (or an agreement for lease is entered into), the developer needs to provide a ‘warning notice’ to the buyer, setting out what qualifies the house as a ‘permitted lease’. If they do not, they can be subject to a financial penalty.
Step 3: Registration: All new long leases need to include a declaration of compliance on the cover and within the lease, stating whether it is either a ‘permitted lease’, or is not a long residential lease of a house. If this declaration is not included, the property can be restricted from re-sale until compliance is clarified. This is to protect future buyers from purchasing a prohibited lease.
For site-wide permitted leases (listed in Schedule 1 Part 1), there is an additional consumer protection. Prior to Step 1, developers need to apply to the appropriate tribunal for a certificate that the proposed leasehold house is exempt. If they do not, they can be subject to a financial penalty.
	Failure to comply with the restrictions could result in a fine ranging from £500 - £30,000 per infraction. The government will appoint a lead enforcement authority to investigate and enforce infractions of the ban, but enforcement action can be taken by all local weights and measures authorities.
	If a buyer is mis-sold (i.e. house was not a permitted lease), under provisions in the Act they are entitled to compel the seller to covey the freehold to them for free and to pay their legal costs.