Developers could be banned from selling new-build houses as leaseholds to prevent homeowners being left with extortionate fees.
More than four million people live in leasehold properties in England, giving them the legal right to occupy and use the property for a set period – usually 99 to 999 years.
But the associated fees – including service charges and ground rents – can increase by huge amounts each year, leaving some leasehold properties unsellable.
Ground rent can increase at such a rate that a homeowner could end up having to find many thousands of pounds a year, on top of service charges and their own mortgage payments.
Under plans put forward by Communities Secretary Sajid Javid leaseholds on new builds would be illegal, while ground rents would be massively reduced.
Legal loopholes would be closed to protect leaseholders exposed to possession orders and rules on Help to Buy equity loans would change so they could only be used for “new build houses on acceptable terms”.
Leaseholders pay fees to the freeholder, who owns the ground on which the home is built.
The system has existed for a long time in England and Wales and is particularly common for blocks of flats.
But the trend for new homes being sold as leaseholds has grown in recent years, particularly in the North West of England.
Video: ‘No good reason’ for leasehold houses
Mr Javid hailed a “crackdown on unfair leasehold sales”, telling Sky News: “What we’ve seen, in the last few years especially, is a huge increase in the number of houses, not flats but houses, that are being sold on leasehold terms for no good reason.
“And worse still, once they’ve been sold, those people that have bought those houses are then subject to ground rents that are ever escalating.
“These are just being used as another income stream by developers, not in the interest of consumers.”
Mr Javid suggested there should only be “very exceptional circumstances” where new-build houses could still be sold on a leasehold basis, such as on land held by the National Trust.
He admitted it will be “harder” to deal with homeowners already on leasehold terms, but said the Government want to allow those homeowners to “better express their consumer rights” and offer them a “better right of redress”.
Urging builders to act themselves, the Cabinet minister said: “I would expect today that all developers, those that are responsible, should be listening to this, they should be listening to their customers, they should be listening to what the Government’s got to say about this and they should be taking action.”
But Mr Javid appeared to shy away from supporting the introduction of a cap on ground rents when asked whether ministers would consider such a measure.
He said: “This is an eight-week consultation. We also do want to take views from others. We don’t profess to have all the answers.”
Sir Peter Bottomley, co-chair of the all-party parliamentary group on leasehold reform, welcomed the proposals but said action was also needed to help those with existing leases.