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Competition watchdog orders two major house builders to scrap doubling ground rents
Two major house builders have been ordered to scrap doubling ground rents for leaseholders by the government’s competition watchdog.
The Competition and Markets Authority (CMA) has told Countryside Properties and Taylor Wimpey that they must remove the “unfair” terms from all existing and future leasehold contracts.
It said leasehold clauses which see ground rents double every 10 or 15 years break consumer protection laws.
Countryside and Taylor Wimpey could face court action by the CMA unless they sign formal undertakings committing to remove such terms from their leasehold contracts.
Unscrupulous leasehold practises by major house builders made national headlines in 2016.
Some homeowners have been unable to sell or mortgage their properties because of onerous ground rent terms, leaving them trapped.
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Andrea Coscelli, chief executive of the CMA, said: “These ground-rent terms can make it impossible for people to sell or get a mortgage on their homes, meaning they find themselves trapped.
“This is unacceptable. Countryside and Taylor Wimpey must entirely remove all these terms from existing contracts to make sure that they are on the right side of the law.
“If these developers do not address our concerns, we will take further action, including through the courts, if necessary.”
The CMA announced that it was taking enforcement action against Countryside and Taylor Wimpey in September last year following an investigation requested by ministers.
At the same time action was also taken against Barratt Developments and Persimmon Homes over the potential mis-selling of leasehold houses. These investigations are ongoing.
As part of its wider review of the leasehold sector, the CMA is also investigating investment firms which bought freeholds from the developers and continued to use the same leasehold contract terms.
Housing secretary Robert Jenrick said: “The government asked the CMA to conduct this investigation.
“I strongly welcome their efforts to bring justice to homeowners affected by unfair practices, such as crippling ground rents, which have no place in our housing market.
“This behaviour must end and I look forward to appropriate redress being forthcoming for leaseholders.
“The government is pursuing the most significant reforms to leasehold in 40 years, including by protecting future homeowners, restricting ground rents in new leases to zero and ending the use of leasehold in new houses altogether.”
Ministers proposed banning leasehold houses and reducing ground rents to zero in July 2017, but legislation has not yet been tabled.
A spokesperson for Countryside said: “Countryside has sold no properties with doubling ground rent clauses since 2017 and we introduced the Ground Rent Assistance Scheme in 2020 to assist leaseholders whose ground rents doubled more frequently than every 20 years.
“We will continue to engage constructively with the CMA to resolve this complex issue.
“Alongside these discussions, its resolution will require the engagement of a number of other parties, including certain freehold owners, for a satisfactory solution to be found.”
Countryside’s Ground Rent Assistance Scheme seeks agreement from freeholders to change leases with ground rents doubling at less than 20-year intervals to be inflation-linked, with an offer to pay the leaseholder’s legal fees.
A spokesperson for Taylor Wimpey said: “We will continue to co-operate with the CMA and work with them to find a satisfactory resolution, within the required timescale.”
They added that Taylor Wimpey stopped using 10-year doubling ground rent clauses on new developments from January 2012 and launched a £130m voluntary scheme to cover the cost of changing existing such contracts to have inflation-linked terms in April 2017.
The CMA has produced guidance for people who own or are looking to buy a leasehold property when faced with fees and charges they feel are unfair.
