CMA frees thousands more from doubling ground rents

CMA frees thousands more from doubling ground rents

16:42 PM, 21st March 2022, About 2 years ago

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Fifteen businesses that had bought freeh­olds from housing developer Countryside have now given formal commitments, known as undertakings, to the Competition and Markets Authority (CMA) to remove terms that cause ground rents to double in price. These terms, which kick in every 10 or 15 years, mean people often struggle to sell or obtain a mortgage on their leasehold home. Their property rights can also be at risk if they fall behind on their ground rent. The move comes after the CMA secured undertakings from Countryside in September 2021 to strike out terms that doubled ground rent every 10 to 15 years.

The businesses, which include investment firms and housing associations, will also remove terms that had originally been ground rent doubling clauses, but were converted so that 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.

After securing undertakings from Countryside to remove doubling ground rent terms from its contracts, the CMA turned its eye to businesses that bought Countryside freeholds and continued to use the same ground rent terms at the expense of leaseholders. The CMA wrote to these businesses, setting out its concerns and requiring them to remove these terms from their contracts.

Due to the CMA’s intervention, thousands of 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.

Andrea Coscelli, Chief Executive of the CMA, said: “Thousands more leaseholders can now rest easy knowing they will not be forced to pay costly doubling ground rents. We believe these terms are unjust and unwarranted and can result in people trapped in homes they are unable to sell or mortgage, a major cause of anxiety and stress for so many.

“We welcome the commitment from these businesses to do what is right by their leaseholders by removing these terms, and we will hold them to it.

“While this is a huge step forward, our work here isn’t done. We will continue to work hard to free leaseholders from these problematic terms and will now be putting other housing developers under the microscope.”

Secretary of State for Levelling Up Michael Gove said: “We are restoring fairness in the leasehold system and that’s why we asked the CMA to investigate unjust practices, such as doubling ground rent.

“I welcome their ongoing success in eradicating this unacceptable treatment of leaseholders from the housing market and freeing thousands from such inflated costs. Others must now follow suit, as our work to help all leaseholders continues.

“Homebuyers starting a new lease from this summer will now pay nothing in ground rent costs, setting the path to a more equal future for homeownership.”

As part of its ongoing review, the CMA is continuing to investigate 2 investment groups: Brigante Properties, and Abacus Land and Adriatic Land. While both firms have agreed to remove doubling ground rent terms from the leases they bought from Countryside, the CMA is seeking the same in relation to leases they bought from Taylor Wimpey. The CMA maintains that these terms must be removed. The CMA’s investigation into possible mis-selling by Barratt Developments is also continuing. Further updates will be made in due course.

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