New Build Leasehold: Why Thousands of Buyers Were Caught Out and What's Changed

The Background: How the Leasehold Scandal Unfolded

Between approximately 2012 and 2018, several major UK housebuilders — including Persimmon, Taylor Wimpey, Bellway, and Countryside Properties — sold substantial numbers of new build houses on leasehold terms rather than freehold. This was not, in itself, illegal. Leasehold is the default tenure for flats (because shared ownership of a multi-storey building requires a management structure that leasehold provides). But using leasehold for individual houses, where no such structural reason exists, was unusual and commercially motivated.

The commercial motivation was this: developers could sell the freehold of a leasehold house to an investor — typically a specialist ground rent fund — at a price representing a multiple of the ground rent income. A house with a £500 per annum ground rent doubling every ten years might sell for £7,000–10,000 as a freehold investment, purely based on the income stream. Developers effectively monetised the land twice: once through the house sale price, and again through the freehold sale.

Buyers, often first-time buyers purchasing through Help to Buy, were frequently not advised clearly about the implications. Many did not understand that they had bought a leasehold rather than a freehold property, did not appreciate that ground rents could double, and did not know that they would need to pay a premium to extend their lease or buy the freehold.

The practical consequences were severe. Ground rents doubling every ten years meant a property with a £250 initial ground rent would reach £8,000 per annum within 50 years. Mortgage lenders — particularly after 2016 when this began to be widely reported — refused to lend on properties with doubling ground rent clauses. This made the properties unmortgageable and therefore unsellable. Buyers were trapped.

The Leasehold Reform (Ground Rent) Act 2022

The Leasehold Reform (Ground Rent) Act 2022 came into force on 30 June 2022. It banned the charging of ground rent above a "peppercorn" (effectively zero) on all new regulated leases. This means any new residential lease granted after that date cannot charge ground rent to the tenant.

The Act applies to new leases but does not retrospectively reform existing leases. Buyers of houses with pre-2022 doubling ground rents remain caught in those leases. The government has pursued a remedy through the Leasehold and Freehold Reform Act 2024, which among other reforms made it cheaper and easier for existing leaseholders to extend their leases and buy their freeholds. However, many leaseholders still face significant costs to escape their ground rent obligations.

When buying any new build flat or house today, confirm the ground rent position explicitly. All new leases should have peppercorn ground rent. If you are buying a second-hand new build — a property first sold between 2012 and 2022 — check the lease for ground rent provisions and take specialist leasehold solicitor advice before proceeding.

What the Leasehold and Freehold Reform Act 2024 Changed

The Leasehold and Freehold Reform Act 2024 made several significant changes to the leasehold landscape beyond ground rent:

**Statutory lease extension rights.** The Act extended the statutory lease extension period from 90 to 990 years for both houses and flats, ending the need for leaseholders to extend repeatedly over the life of the property.

**Lease extension and enfranchisement premiums.** The Act changed the calculation basis for lease extension and collective enfranchisement (buying the freehold collectively as leaseholders) premiums, generally making it less expensive for leaseholders to exercise these rights.

**Building safety.** The Act introduced enhanced rights for leaseholders in buildings with fire safety defects, building on the protections introduced by the Building Safety Act 2022.

**Managing agents.** New rights to challenge managing agents' fees and to seek appointment of a new manager through the First-tier Tribunal (Property Chamber) were strengthened.

These reforms are significant but incomplete. The government had originally indicated it would abolish leasehold entirely for new houses — this commitment has been watered down, and the full abolition of new house leaseholds is not yet legally enacted as of early 2026.

What to Check Before Buying Any New Build With a Lease

Whether you are buying a new build flat (where leasehold is still the standard tenure) or checking a second-hand new build that may have a pre-2022 lease, your solicitor must check:

**Lease term.** New leases should be granted for 990 years (or at least 999 years). Anything below 125 years on a new flat is worth querying — though for new builds this should not arise given current market practice.

**Ground rent.** Must be peppercorn on any new lease post-June 2022. On pre-2022 second-hand new builds, check the initial ground rent, the review mechanism, and the review period carefully. Avoid purchasing any property with a ground rent that doubles more frequently than every 20 years, or any property where the ground rent is linked to RPI without a cap.

**Service charge.** Review the service charge accounts and the lease provisions governing how service charges are calculated and distributed. Check whether there is a reserve fund (sinking fund) in place and what its balance is.

**Management company and managing agent.** Research the managing agent. Check Companies House for the management company — verify it is properly constituted, that directors are contactable, and that accounts are filed.

Store the full lease, service charge accounts, and all correspondence with the management company in your Property Passport UK new build passport. This documentation is essential for any future lease extension, enfranchisement, or sale.