In news that has been welcomed by the National Leasehold Campaign (NLC), the Competition and Markets Authority (CMA) has announced that thousands of leaseholders who paid a doubled ground rent will receive refunds, and nine more companies will remove these costly terms from leasehold contracts.
The CMA has secured undertakings from nine companies that bought freeholds from leading housing developer Taylor Wimpey. 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. The move will impact over 5,000 households throughout the UK, with many who paid a doubled rent receiving a refund.
All 9 firms must now remove problematic contract terms that cause ground rents to double in price every 10 years. The firms will also remove contract terms which were originally doubling clauses, but were converted so the ground rent increased in line with the Retail Price Index (RPI). The CMA believes that 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 over 20,000.
All affected leaseholders will now see their ground rents remain at the original amount – i.e. when the property was first sold – and this will not increase over time, say the CMA. The nine freeholders have also agreed to refund residential leaseholders who had already paid out under doubled ground rent terms.
“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,” said Sarah Cardell, interim Chief Executive of the CMA. 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.”
A statement from the NLC read:
“The National Leasehold Campaign (NLC) is delighted that the CMA are continuing to make progress on holding developers and freeholders to account for their role in the leasehold scandal.
The NLC urges those developers and freeholders who have not yet agreed undertakings with the CMA to do the right thing and consign these horrific doubling ground rents to the history books where they belong.”
They did, however, issue a reminder that all is not yet solved for leaseholders:
“Whilst today is another important milestone in rectifying the wrongs of onerous doubling ground rents, 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.”
Katie Kendrick, founder of the NLC, added:
“Leaseholders are exploited everyday via the feudal leasehold system with have in England & Wales. Leaseholders have simply had enough of being used as an endless income stream for freeholders, many of whom are offshore and remain faceless. We will continue to campaign to end leasehold and to mandate Commonhold.”
Secretary of State for Levelling Up Greg Clark 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.
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.”
Since 2019, the CMA has sought to tackle issues around the possible mis-selling of leasehold homes and contract terms it believes are unfair. Its investigations involving 7 leading housing developers – and businesses who purchased freeholds from these firms – have led to landmark changes:
- August 2022: 9 businesses who purchased freeholds from Taylor Wimpey commit to remove problematic doubling terms. Developers Crest Nicholson, Miller Homes, Redrow and Vistry agree to help remove doubling terms from leasehold contracts they sold on.
- March 2022: 15 businesses who bought freeholds from Countryside remove doubling ground rent terms.
- December 2021: Taylor Wimpey removes doubling ground rent terms, and RPI-based terms that were originally doublers, from all its contracts.
- September 2021: Countryside Properties removes doubling ground rent terms in relation to freeholds it owns.
- June 2021: Persimmon offers leasehold house owners the opportunity to buy the freehold of their property at a discounted price that better reflects what they expected when they originally bought their home.
- June 2021: Aviva removes doubling ground rent terms in relation to freeholds it bought.
As the investigation moves into the final stages, the CMA is engaging with additional firms, including the Abacus Land and Adriatic Land investment group, which bought freeholds from Taylor Wimpey.
