CMA action frees leaseholders from Taylor Wimpey ground rents that double every 10 years

CMA action frees leaseholders from Taylor Wimpey ground rents that double every 10 years

9:56 AM, 23rd December 2021, About a month ago 5

Text Size

Taylor Wimpey has voluntarily given formal commitments to the Competition and Markets Authority (CMA) to remove terms from leasehold contracts that cause ground rents to double in price. The effect of these increases, which kick in every 10 years, is that people often struggle to sell or obtain a mortgage on their home. Their property rights can also be at risk if they fall behind on their rent.

Taylor Wimpey will also remove terms that had originally been ground rent doubling clauses but were converted so that the ground rent increased in line with the Retail Prices Index (RPI). The CMA believes that the original doubling clauses were unfair terms and should therefore have been fully removed, not replaced with another term that increases the ground rent.

The move comes after the CMA launched enforcement action against 4 housing developers in September 2020. These were Countryside and Taylor Wimpey, for using possibly unfair contract terms, and Barratt Developments and Persimmon Homes over the possible mis-selling of leasehold homes. As part of this action, the CMA has already helped thousands of leaseholders by securing commitments from Countryside and Persimmon, as well as from an investor in freeholds, Aviva.

Due to the CMA’s action, affected Taylor Wimpey leaseholders will now see their ground rents remain at the original amount i.e. when the property was first sold, and they will not increase over time. Taylor Wimpey has also confirmed to the CMA that it has stopped selling leasehold properties with doubling ground rent clauses.

Andrea Coscelli, Chief Executive of the CMA, said: “This is a huge step forward for leaseholders with Taylor Wimpey, who will no longer be subject to doubling ground rents. These are totally unwarranted obligations that lead to people being trapped in their homes, struggling to sell or obtain a mortgage. I hope the news they will no longer be bound into these terms will bring them some cheer as we head into Christmas.

“Other developers and freehold investors should now do the right thing for homeowners and remove these problematic clauses from their contracts. If they refuse, we stand ready to step in and take further action – through the courts if necessary.

“Of the four developers against whom the CMA opened a case in September 2020 three have now settled with the CMA. Only the investigation into Barratt Developments is still ongoing.

“This is the kind of issue that could be resolved at pace and met with fines if the CMA receives the consumer powers that the Government is currently consulting on.”

Secretary of State for Levelling Up Michael Gove said: “Unfair practices, such as doubling ground rents, have no place in our housing market – which is why we asked the CMA to investigate and I welcome their success in holding these major industry players to account.

“This settlement will help to free thousands more leaseholders from unreasonable ground rent increases and other developers with similar arrangements in place should beware, we are coming after you.

“We continue our work to protect and support all leaseholders and our legislation to restrict ground rents in new leases to zero will put a stop to such unfair charges for future homeowners once and for all.”

As part of its review of the leasehold sector, the CMA is continuing to investigate two investment groups, Brigante Properties and Abacus Land and Adriatic Land, after it wrote to the firms earlier this year setting out its concerns and requiring them to remove doubling ground rent terms from their contracts. The CMA’s investigation into Barratt Developments is also continuing.

For more information on the CMA’s ongoing work in the sector and for future updates, visit the leasehold case page.



Comments

by Rennie

11:04 AM, 23rd December 2021, About a month ago

I know nothing about this but my gut reaction is that the principal of the ground rent increasing is sound. They own the land, they have to cough up if a liability arises for them so the rent must increase. Doubling it every 10 years is not fair or smart. it should increment over time by some measure like, for example, the CPI or RPI is used. As to the frequency of increases 3 to 5 years sounds sort of reasonable.

by Suresh Parikh

20:52 PM, 23rd December 2021, About a month ago

Reply to the comment left by Rennie at 23/12/2021 - 11:04
I agree with you.
I would love to have Bernie's views.
We should draft a fair Ground Rent clause.
I think the Council of Mortgage Lenders have some formula to determine whether to lend or not.
This is from the top of my head:
"It is hereby agreed and acknowledged that the Ground Rent shall always be at a level that is fair between the parties and the demise shall always have a market value. Any formula used by any UK lending body shall act as a capping formula."

by Badger

10:35 AM, 26th December 2021, About a month ago

Reply to the comment left by Rennie at 23/12/2021 - 11:04
Do you really think that the owners of the land put their hands into their own pockets to pay for anything at all in these kinds of scenarios?

by Rennie

16:04 PM, 31st December 2021, About 4 weeks ago

Reply to the comment left by Badger at 26/12/2021 - 10:35
Well, I did say i know nothing. Always willing to learn. Don't they have some sort of liability for the grounds or the external bits? And how about in England where flats don't have a freehold like they do in Scotland?

by Badger

16:56 PM, 31st December 2021, About 4 weeks ago

Reply to the comment left by Rennie at 31/12/2021 - 16:04
Yes, they have liabilities but the costs associated with these are always passed down to the leaseholder.


Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

BECOME A MEMBER