The Nationwide Building Society has recently announced that from 11th May 2017 it will no longer lend on new build properties being purchased directly from a developer with a lease length of less than 125 years for a flat and 250 years for a house. In addition, it has also announced that it will not lend on newly built property whose ground rent doubles every five, ten or fifteen years, requiring ground rent escalation clauses to be linked to inflation. It also said that the maximum acceptable starting ground rent on all new build leasehold properties would be limited to 0.1% of the property’s value.
The announcement follows a spate of publicity involving some the country’s largest home builders including Bovis and Taylor Wimpey, with the latter setting aside £130m to tackle the issue.
No other lenders have announced similar policies to date but it would be surprising if other lenders didn’t follow suit so we would anticipate further announcements being made in the months to come.