Landlord leaseholders to get refunds from rip-off ground rents

Landlord leaseholders to get refunds from rip-off ground rents

9:31 AM, 26th August 2022, About a month ago 10

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Action by the Competition Markets Authority (CMA) will see landlords who are leaseholders paying a doubled ground rent receiving a refund from the rip-off practice.

And nine more companies will remove these costly terms from their leasehold contracts.

Sarah Cardell, the interim chief executive of the CMA, said: “For years leaseholders have been plagued by what we believe are unfair practices.

“That’s why we sought to tackle the problem by launching action against some of the biggest names in the business.”

She added: “As a result of our work, over 20,000 people now have a new lease of life, freed from issues like costly doubling ground rent terms.”

Thousands of leaseholders to get refunds

Greg Clark, the Secretary of State for Levelling Up, said: “This is good news that will see thousands of leaseholders get the refunds they are entitled to.

“Levelling up home ownership and creating a fairer, more transparent leasehold system is a top priority for this government, and these agreements are an example of this in action.”

He added “We will work with the CMA to continue challenging industry on its practices, so we can ensure more leaseholders get the fair deal they deserve.

Companies must now remove ‘problematic contract terms’

The companies that bought freeholds from the housing developer Taylor Wimpey must now remove problematic contract terms that cause ground rents to double in price every 10 years, which can lead to people being trapped in homes they cannot sell or mortgage.

The businesses that purchased freeholds from Taylor Wimpey and provided undertakings are:

  • BDP Freehold Limited
  • Mortgage Incentive Funds Limited
  • The Bridges (Darlington) Management Company Limited
  • Bessant Properties Limited
  • Brigante Properties Limited
  • Furatto Limited and Long Term Reversions No 1 Limited
  • SF Ground Rents No18 Limited, SF Ground Rents No 15 Limited and RMB 102 Limited
  • Sarum Properties Limited
  • Taylor Court Limited.

The businesses that purchased freeholds from Taylor Wimpey who have not provided undertakings yet are:

  • Island Apartments Freehold Limited
  • Madison Close Freeholders Limited
  • Elmdon Real Estate LLP
  • Abacus Land 1 (Holdco 1) Limited, Abacus Land 4 Limited and Adriatic Land 1 (GR3) Limited (part of the Abacus Land and Adriatic Land investment group)
  • Plaza 2 Surbiton Limited.

A further four national developers – Crest Nicholson, Redrow, Miller Homes and Vistry – have also agreed to work with the companies who purchased their freeholds to remove doubling terms.

Ground rents will remain at the original amount

All affected landlord leaseholders will now see their ground rents remain at the original amount, that is when the property was first sold, and this will not increase over time.

The nine freeholders have also agreed to refund residential leaseholders who had already paid out under doubled ground rent terms and remove contract terms which were initially doubling clauses but were converted so, the ground rent increased in line with the Retail Price Index (RPI).

The original doubling clauses were unfair and should therefore have been fully removed – not replaced with another term that still increases the rent.

This action brings the total number of homeowners that have benefitted from the CMA’s investigation to more than 20,000 after starting their investigations in 2019.



Comments

CYRIL STALEY

10:55 AM, 26th August 2022, About a month ago

Proxima GR Properties Limited who is our Landlord uses an incredibly incomprehensible formula to increase our ground rent which is currently £609.26p per year. Next rise due 2031.
Estates & Management Limited are their collection agents.
This rent is currently higher than the £250 government limit and I have had experience of a mortgage company declining business on account of this high charge which relates to my property in Berkshire, well outside the higher London charge area.

CYRIL STALEY

11:06 AM, 26th August 2022, About a month ago

Proxima is NOT on the list and flat sales at our 46 flat purpose-built, well-managed property are being severely effected.

Ian Narbeth View Profile

11:49 AM, 26th August 2022, About a month ago

This is an issue that the Government could have dealt with but chose not to. See my article last December
Instead of Greg Clark using the politicians' language of people getting refunds "they are entitled to" (actually in law and logic they are not entitled to them. They made a bad bargain and most people who make bad bargains are stuck with them) the CMA is strong-arming some of the house-builders and getting them to lean on the purchasers of ground rents. 20,000 is a good start but this process won't benefit everyone and will take years to complete.
Simple question for Mr Clark: "Why did HMG not legislate for this in the Leasehold Reform (Ground Rent) Act 2022?

Dylan Morris

13:41 PM, 26th August 2022, About a month ago

Ground rents doubling every 10 years may end up being quite an advantageous formula when compared to ground rents linked to RPI.

Katiejane13uk

20:56 PM, 26th August 2022, About a month ago

Reply to the comment left by CYRIL STALEY at 26/08/2022 - 10:55
Please join the National Leasehold Campaign (NLC).

Katiejane13uk

20:57 PM, 26th August 2022, About a month ago

Reply to the comment left by Dylan Morris at 26/08/2022 - 13:41
Totally agree Dylan. The NLC is becoming increasingly concerned about the less publicised but much more prevalent RPI leases.

In today’s high inflationary environment leases linked to RPI are more onerous than doublers and remember that ground rents are a charge for no service. We urge the CMA to take another look at these onerous leases in these times when all consumers are facing a cost-of-living crisis. Leaseholders are also facing huge increases in service charges as inflation soars.

Katiejane13uk

20:59 PM, 26th August 2022, About a month ago

Reply to the comment left by Ian Narbeth at 26/08/2022 - 11:49
Leaseholders are entitled to it. If the developers and freeholders didn't agree to strike out this unfair contract term they would face enforcement action.

CYRIL STALEY

21:18 PM, 26th August 2022, About a month ago

Reply to the comment left by at 26/08/2022 - 20:56
How?

Dylan Morris

9:14 AM, 27th August 2022, About a month ago

Reply to the comment left by at 26/08/2022 - 20:57There is argument to say that leaseholders knew exactly what they were signing up for when they purchased with ground rent linked to RPI. This is true. However the exact same can be said for doubling ground rents, they knew exactly what they were signing up for, yet these leaseholders are being singled out for assistance and having their ground rent reduced to zero.

Ian Narbeth View Profile

10:11 AM, 30th August 2022, About a month ago

Reply to the comment left by at 26/08/2022 - 20:57"In today’s high inflationary environment leases linked to RPI are more onerous than doublers". Sorry, as a generalisation that is incorrect. It all depends on how frequently the doubling is. Doubling every 25 years and it is roughly in line with the increase in inflation and not onerous. Between June 1980 and June 2005 the Retail Prices Index rose by 184%. Between June 1997 and June 2022 it rose by 115.9%.
Doubling every 25 years is equivalent to compounded annual increases of 2.8114%.
Doubling every 10 years is quite different as this table shows:
Ground rent £100.00 £100.00
Lease length 125 years 125 years
Doubles every 25 years 10 years
Highest annual rent £1,600.00 £409,600.00
Total payable £77,500.00 £6,143,000.00

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