Michael Gove’s signature bill to stop developers selling new houses as leasehold properties contains loopholes that will allow them to continue doing so in certain circumstances, a revelation that has triggered anger among housing campaigners.
The housing secretary will bring his leasehold reform bill back to the Commons for a final time on Tuesday, this time with clauses to ban leases on new homes after they were mistakenly left out at the previous stage.
The new clauses contain exemptions, however, that allow developers to continue to sell new leasehold houses if they are part of a retirement village or where an existing lease has already been granted on the land, even if no property has yet to be built.
Sebastian O’Kelly, chief executive of the Leasehold Knowledge Partnership, which represents leaseholders, said: “It is a shame that this bill continues to allow the leasehold system to be propagated, even on new houses. The best solution would be to replace it altogether.”
Gove has pledged to end the leasehold system, calling it “outdated” and “feudal”. Millions of property owners own their homes through leases in England and Wales, which are almost the only places in the world where the system exists.
After resistance from Downing Street, Gove’s bill does not end the leasehold system altogether, but makes a series of reforms, including extending the default length of a lease and making it cheaper to convert them into freeholds. The bill does not contain a provision to bring ground rents to zero for those who already own their homes through leasehold, but Gove suggested this weekend that he could put forward such a proposal within months.
While most leasehold homes that are sold are flats, Gove promised to end the practice of using the system to sell houses, which is prevalent in certain parts of the country.
However, when the bill was introduced to the Commons last November, it did not contain any clauses to ban new leasehold houses, thanks to a mix-up in Whitehall. Officials blamed a last-minute wrangle between Gove’s department and Downing Street over the text of the bill for the error, which they promised to fix through amendments.
Those amendments, which will be debated on Tuesday, allow developers to continue selling new houses through leasehold if they are part of a retirement community. They will also be able to do so if they own the land through a lease granted to another organisation before the policy was announced in December 2017.
Harry Scoffin, an anti-leasehold campaigner with Free Leaseholders, said: “Leasehold houses are an obvious racket. In December 2017, the government committed to banning them going forward.
“But the real scandal here is that vulnerable and elderly housebuyers who are looking to right-size face being unwittingly extorted in their new home because retirement housebuilders have got a special carve-out from this legislation.”
Matthew Pennycook, the shadow housing minister, said: “Having initially claimed that their bill ended the sale of new leasehold houses when it didn’t, the government is now proposing a purported ban with such extensive exemptions that it will still see leasehold houses built in significant numbers.”
Campaigners believe ministers have made concessions after heavy lobbying from property developers, especially in the retirement property sector.
Robert Jenrick, the former cabinet minister, said in 2021 that he had been lobbied intensely by the sector when he was housing secretary. He told MPs at the time: “As secretary of state, I came under fierce resistance and lobbying from the retirement property sector. Its lobbyists approached members of parliament and my department and threatened judicial review of our proceedings.”
