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.
Mr Javid said: “It’s clear that far too many new houses are being built and sold as leaseholds, exploiting home buyers with unfair agreements and spiralling ground rents.
“Enough is enough. These practices are unjust, unnecessary and need to stop.
“Our proposed changes will help make sure leasehold works in the best interests of home buyers now and in the future.”
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.
The proposals are subject to an eight-week consultation.