Countryside Properties scraps doubling of ground rent
Countryside Properties will remove terms from leasehold contracts which mean ground rents double in price every 10 to 15 years.
It comes after an investigation by the Competitions and Markets Authority (CMA) into the leasehold sector.
The developer will also remove clauses which originally doubled ground rent but were changed to increase in line with the Retail Prices Index (RPI).
The regulator said the original terms were potentially unfair and should have been removed completely, not replaced with an alternative which still increased costs.
Thousands of Countryside leaseholders will now see their ground rents remain at the original amount as when the property was first sold and this will not rise over time.
The developer also confirmed to the CMA that it had stopped selling leasehold properties with a doubling rent clause since 2017.
It also insisted it was not the subject of mis-selling allegations in the investigation.
Where Countryside has sold the freehold, and cannot remove clauses itself, then it will help get them removed at no cost to leaseholders. The developer confirmed it expected to make a further provision of £5m to its ground Rent Assistance Scheme in addition to the £10m provision previously announced.
This scheme covers the legal fees incurred by leaseholders associated with the terms of the lease.
Iain McPherson, chief executive of Countryside, said: “Countryside has engaged extensively and constructively with the CMA throughout the course of its review to reach this positive outcome for affected leaseholders.”
Market-wide investigation ongoing
The developer is the latest firm to amend its policy following regulatory action. It was among the four developers under investigation, along with Barratt Developments, Taylor Wimpey and Persimmon Homes.
Since the probe was launched, Persimmon has agreed to let leaseholders purchase the freehold of their homes for a discounted price and Aviva removed doubling ground rent terms.
As part of its review, the CMA is continuing to investigate investment groups Brigante Properties, and Abacus Land and Adriatic Land, after it wrote to the firms earlier this year requiring them to remove doubling ground rent terms.
The investigation into Barratt Developments and Taylor Wimpey is still ongoing.
Andrea Coscelli, chief executive of the CMA, said leaseholders with Countryside could breathe a sigh of relief knowing they no longer had to pay doubling ground rents.
She added: “No one should feel like a prisoner in their home, trapped by terms that mean they can struggle to sell or mortgage their property. We will continue to robustly tackle developers and investors – as we have done over the past two years – to make sure that people aren’t taken advantage of.
“Other developers, such as Taylor Wimpey, and freehold investors now have the opportunity to do the right thing by their leaseholders 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.
“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”.
Housing secretary Robert Jenrick welcomed the CMA’s success on “bringing justice to homeowners”.
He said: “We will continue to support leaseholders who may have been mis-sold properties and our new legislation will put an end to this practice for future homeowners, by restricting ground rents in new leases to zero.”