End to doubling ground rent terms for thousands of leaseholders
Thousands of leaseholders’ ground rents will be charged at the amount set when they first bought their properties, ending the unfair practice of ‘doubling clauses’.
A total of 15 investment firms and housing associations which bought freeholds from developer Countryside have agreed to remove terms allowing them to double ground rents every 10-15 years.
Under this unfair practice, many people struggled to sell their leasehold properties or obtain a mortgage. It also meant they were at risk of losing the property if they failed to keep up with the crippling payments.
The firms will also remove terms relating to ground rent increasing in line with the Retail Prices Index (RPI) measure of inflation, which were a replacement for the doubling clauses.
The Competition and Markets Authority (CMA) which investigated the sector, said the original doubling clauses were unfair terms and should have been fully removed, not replaced with another term that increases the ground rent.
It builds on the CMA’s enforcement action of Countryside where it committed to remove the doubling ground rent terms. But as a number of businesses bought Countryside freeholds and continued to use these unfair terms, the CMA has now gained the same commitments from the 15 firms.
- Adriatic Land 3 Limited (part of the Abacus Land and Adriatic Land investment group);
- Brigante Properties Limited;
- Chris Allnutt and Company Management Limited;
- Claycourt Limited;
- Penult 101 Limited;
- RMB 102 Limited;
- SF Ground Rents No 15 Limited;
- Great Places Housing Association;
- London and Quadrant Housing Trust;
- Mann Island Properties Limited;
- Notting Hill Genesis;
- Poplar Housing and Regeneration Community Association Limited;
- RG Reversions 2014 Limited;
- Tapestart Limited;
- Weathercourt Limited.
It means over 3,400 leaseholders’ ground rents will remain at the amount charged when their home was first sold. Overall, the CMA has taken enforcement action against four housing developers, including Countryside and Taylor Wimpey for using possibly unfair contract terms, and Barratt Developments and Persimmon Homes over the possible mis-selling of leasehold homes.
‘More equal future for homeownership’
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.”
The CMA is continuing to investigate two 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.