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More than 500 leaseholders freed from doubling ground rents after CMA intervention
Hundreds of households will no longer see their ground rents doubled after intervention from the Competition and Markets Authority (CMA).
The CMA took action against eight firms, which means more than 500 leaseholders will no longer be subject to terms that cause their ground rents to double in price.
These terms, which kick in every 10 to 15 years, can leave people trapped in homes they cannot sell or mortgage, and their property rights can be at risk if they fall behind on payments.
In England and Wales, most owner-occupied flats are owned on a long leasehold basis, while shared ownership properties are sold on a long lease.
Leasehold, traditionally used for flats but also applied to new build houses in recent years, means the deedholder does not own their home outright and must usually pay an annual ground rent to the freeholder.
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The Leasehold Reform (Ground Rent) Act 2022 means that if any ground rent is demanded as part of a new residential long lease, it cannot be charged at more than the cost of one peppercorn per year – effectively setting the rate to zero.
However, this currently only applies to new leases.
The companies the CMA took action against, which include investment firms, bought freeholds originally owned by housing developers Countryside, Crest Nicholson, Miller Homes, Redrow, Taylor Wimpey and Vistry, and continued to use the “problematic” contract terms at the expense of leaseholders.
All affected leaseholders will now see their ground rents return to the original fee amount charged when the property was first sold, and it will not increase over time.
George Lusty, interim executive director for consumer protection and markets at the CMA, said: “This is another great win for leaseholders. Over the past five years, we’ve achieved real and impactful change, with over 21,000 households freed from issues such as costly doubling ground rents.
“We hope those affected by this update can breathe a little easier knowing they won’t have to struggle against this type of rising fee anymore, particularly when many are already grappling with high costs elsewhere.”
The government launched a consultation on ground rent reform in November, which included capping the charge at a peppercorn rate for existing leaseholders.
The proposals include setting at this token rate for existing leaseholders, freezing ground rents at current levels and capping ground rents at a percentage of the property value.
In its response to the consultation, the CMA said modern leasehold ground rents were “neither legally or commercially necessary”.
Responding to the news, the National Leasehold Campaign (NLC) said it was “delighted”.
Katie Kendrick, founder of the NLC, added: “While the emphasis for the CMA investigation has focused on doubling ground rents, it’s evident that the consumer champion also shares our significant concerns regarding RPI [Retail Price Index] escalating ground rents.
“Escalating ground rents have led to leaseholders experiencing issues with selling and mortgaging properties resulting in them being trapped, unable to sell or move on with their lives, putting consumers in an impossible situation.”
