The Competition and Markets Authority (CMA) has confirmed that a further 500 households will benefit from commitments to not double ground rents. It has secured undertakings from 8 investment firms who acquired the freeholds from house builders, that they will return ground rents to the original fee amount from when the property was first sold, and will not increase over time.
Over 30 companies have now committed to stopping to practice, which came to prominence following intervention by the CMA in 2020. The investigation concerned new-build leasehold properties were sold with contracts which committed the home owners to terms which saw ground rents double every 10 or 15 years. At the time, 4 developers were investigated for breaking consumer protection law; misleading consumers and treating leaseholders unfairly.
Since then, the CMA says it has secured commitment from housebuilders including Persimmon, Countryside Properties, Taylor Wimpey, Crest Nicholson, Miller Homes, Redrow and Vistry; this latest sets of commitments follows Aviva’s undertaking in 2021 to remove doubling ground rents from freeholds it acquired as part of it’s investment portfolio.
The investment firms are
- Abacus Land 1 (HoldCo 1) Limited
- Adriatic Land 3 Limited and Abacus Land 4 Limited
- Adriatic Land 3 Limited
- Island Apartments Freehold Limited
- Madison Close Freeholders Limited
- Plaza 2 Surbiton Limited
- RMB 102 Limited
- Space in London Limited
George Lusty, Interim Executive Director for Consumer Protection and Markets, said:
“This is another great win for leaseholders. Over the past 5 years, we’ve achieved real and impactful change, with over 21,000 households freed from issues such as costly doubling ground rents. We hope those affected by this update can breathe a little easier knowing they won’t have to struggle against this type of rising fee anymore – particularly when many are already grappling with high costs elsewhere.”
The issue remains firmly on the agenda with a consultation currently ongoing to seek views on limiting the level of ground rent leaseholders are required to pay. ‘Modern leasehold: restricting ground rent for existing leases’ was launched in November outlining five options including;
- capping ground rents at a peppercorn
- setting maximum financial value for ground rent
- capping ground rents at a percentage of the property value,
- limiting ground rent to the original value when the lease was agreed
- freezing ground rent at current levels.
Estate agency membership body Propertymark have come out in favour of a peppercorn rent but critics have warned that plans to limit leasehold could cost the taxpayer millions of pounds in compensation with pension holders, charities and other institutions that receive ground rent income from their investments in freeholds anticipated to seek reimbursement from the Government.
