The investment company has agreed to remove ‘unfair’ ground rent terms from leasehold contracts and repay leaseholders who previously paid doubling ground rent.

The move came after the Competition and Markets Authority (CMA) secured a formal commitment from Aviva as part of its ongoing work to tackle issues in the leasehold sector.

Housebuilder Persimmon has also agreed to offer leasehold house owners the opportunity to buy the freehold of their property at a cheaper price than it previously offered.

The CMA launched enforcement action against Barratt Developments, Countryside Properties, Persimmon Homes and Taylor Wimpey in September 2020.

In connection with this action, the CMA has also been investigating several investment firms that bought a large number of freeholds from two of these developers and continued to use the same ground rent terms.

The commitments signed by Aviva and Persimmon are known formally as ‘undertakings’.

Undertakings by Aviva

Aviva’s undertakings mean it will remove clauses in leasehold contracts which meant that the ground rent payable by leaseholders would double at pre-set intervals.

It will also remove terms which were originally doubling clauses and have been converted into RPI-based ground rent terms.

Doubling clauses that cause ground rents to double every 10 to 15 years can make properties unaffordable and mean people often struggle to sell or mortgage their homes. They can also affect leaseholders’ property rights.

Where Aviva is the current freeholder, those leaseholders’ ground rents will revert to the original amount when the property was first sold, and this will not increase over time.

Where leaseholders have already paid doubling ground rents, this money will be refunded.

Persimmon’s undertakings

Following the CMA action, Persimmon will offer leasehold house owners the option to buy the freehold of their property at a price ‘better reflecting’ what they expected when they originally bought their house.

It will also make repayments to certain homeowners who have already purchased their freeholds.

The CMA says this addresses concerns raised by consumers that they were led to believe they could buy their freehold at a certain price, only to find out later that this price had increased by thousands of pounds with no warning.

It also means those individuals who have already bought their freehold will receive a refund, meaning they don’t miss out.

Persimmon has also agreed to extend the timeframe that prospective buyers are given to exchange contracts after reserving a property, and to provide people with more upfront information about the annual costs of buying a home.

The CMA says this addresses concerns that the ‘reservation period – i.e. the period of time during which a potential buyer must take a number of steps to progress the purchase – is too short and can pressure the buyer into making a decision, and that more information is needed up-front for consumers to make purchasing decisions.

Andrea Coscelli, chief executive of the CMA, said: “This is a real win for thousands of leaseholders – for too long people have found themselves trapped in homes they can struggle to sell or been faced with unexpectedly high prices to buy their freehold. Now, they can breathe a sigh of relief knowing things are set to change for the better.

“It’s good that Aviva and Persimmon have responded positively to this investigation, enabling these issues to be fixed for leaseholders. But our work isn’t done. We now expect other housing developers and investors to follow the lead of Aviva and Persimmon. If not, they can expect to face legal action.”

The CMA has also written to the investment groups Brigante Properties, Abacus Land and Adriatic Land, setting out its concerns and requiring them to remove doubling ground rent terms from their contracts. These firms bought leasehold contracts from Countryside and Taylor Wimpey.

They now have the opportunity to respond to the CMA’s detailed concerns and avoid court action by signing undertakings to remove such terms.