Buy to let landlords investing in new build leasehold properties that are almost impossible to sell will get a lifeline from the government.
Thousands of landlords who have ploughed cash into leasehold new build properties have found the homes difficult to sell or remortgage as lenders refuse to secure loans against them because of the ground rent terms.
The problem is escalating ground rents.
Builders sell the homes with a 999-year lease, which they claim is as good as a freehold, but lawyers are warning off purchasers because ground rents will rise to almost £10,000 a year on some estates by 2060.
Communities secretary Sajid Javid has pledged to help – but has stopped short of promising legislation help landlords and homebuyers saddled with ground rent expenses.
“We must make sure the kind of abuses he mentioned are stamped out and we will continue to do everything we can. We do work with a number of stakeholders and we can certainly see how we can do more,” said Javid in response to a written question in the House of Commons about the issue from MP Peter Bottomley.
Reports show that the ground rent on a flat in Dudley, West Midlands, built in 2010 would rise to £8,000 a year.
The ground rent on a £200,000 house in Bolton also built in 2010 would hit £9,440 by 2060.
Lobby group Leasehold Knowledge Partnership claims new-build leasehold houses worth nearly £2 billion were sold in England and Wales last year.
After a year or so, the developer sells the freehold to a private company which manages the ground rents as an investment.
Ground rents are a payment to a freeholder that are separate from service charges, which are a contribution towards the cost of maintaining shared parts of a property.
Until recently, leasehold agreements allowed freeholders to double ground rents every few years.
Many new leases cap rises to the annual increase in the retail prices index (RPI).