Ending rip-off leases will not help the 1.2 million existing victims, admits Sajid Javid

A pledge to end the “great scandal” of houses sold on rip-off leases will do nothing to help around 1.2m existing victims, a Cabinet minister has indicated.

No direct compensation will be paid to owners forced to pay eye-watering rental charges on top of their mortgages – despite some Conservative MPs likening the practice to the PPI insurance scam.

Instead, those people must rely on the goodwill of developers agreeing voluntarily to “right some of the wrongs of the past”, Communities Secretary Sajid Javid said.

Alternatively, they could sue solicitors who failed to alert them to the eye-watering payments they would face, the minister suggested.

The stance is certain to anger existing leaseholders after Mr Javid vowed to ban a practice he condemned as “feudal” and an “unjustifiable licence to print money”.

In the case of payment protection insurance (PPI), millions of people have been paid around £23bn in compensation after a watchdog judged the policies had been “widely mis-sold”.

Mr Javid said an eight-week consultation into the details of the ban on developers selling houses as leaseholds, rather than freeholds, would consider the plight of existing victims.

However, he made clear that the aim of the policy was to “stop this for the future”, rather than address the injustices of the past and present.

And, asked if any of the existing 1.2m leaseholders would receive compensation, he instead pointed to developers which had already announced their own compensation schemes.

“What I do hope is that this focus we are providing today, with the launch of this consultation, will get more of the builders and developers to show what they can do,” Mr Javid told BBC Radio 4.

“If they are responsible, if they want to keep their business in the future and show that they really care about their customers, they should be seeing what they can do to right some of the wrongs of the past.”

Mr Javid acknowledged there were cases of people who were told it would cost them £2,000 to sell their homes in future – only for them to discover the true bill was £40,000.

But he said the Government would concentrate on strengthening their “rights of redress and their consumer rights”.

“There may be some cases where perhaps the solicitors they used did not bring to their attention the clauses that they were signing up to,” Mr Javid added.

Most flats will continue to be sold as leaseholds, allowing the owner of the building to pay for their upkeep where there are several different households involved.

The target will instead be the sale of houses as leaseholds, allowing developers to ramp up ground rents to as much as £10,000 a year.

Often, the buyers do not fully understand the contracts they are signing. Those with the biggest charges can struggle to sell their homes and many banks now refuse to lend against them.

The practice has ballooned in recent years, with leasehold properties making up 43 per cent of all new build registrations in England and Wales in 2015, compared with 22 per cent in 1996.