The CMA has written to two housebuilders about leasehold terms
(Picture: Neil Hall/Reuters)Housebuilders Countryside and Taylor Wimpey have been asked by the competition regulator to remove certain contract terms that mean leaseholders have to pay ground rents that double every 10 or 15 years.
A ground rent involves a leasehold owner of a property paying an annual fee to a freeholder. Often housebuilders sell on freeholds to third parties.
Certain ground rent clauses can make some homes unsellable as lenders will in cases not offer mortgages against them.
The Competition and Markets Authority today said it has written to listed builders Countryside and Taylor Wimpey outlining its specific concerns that their use of terms that double the ground rent every 10 or 15 years breaks consumer protection law.
The CMA is requiring the removal of ground rent terms which it thinks are unfair from all existing Countryside and Taylor Wimpey contracts to make sure they are no longer in breach of the law.
It added that these firms must also agree not to use the terms again in any future leasehold contracts.
Andrea Coscelli, chief executive of the CMA, said: “These ground rent terms can make it impossible for people to sell or get a mortgage on their homes, meaning they find themselves trapped. This is unacceptable.”
Countryside and Taylor Wimpey now have the opportunity to respond to the CMA’s concerns and avoid court action by signing formal commitments – known as ‘undertakings’ – to remove the ground rent terms from their leasehold contracts.
FTSE 100 firm Taylor Wimpey said: “We will continue to cooperate with the CMA and work with them to find a satisfactory resolution, within the required timescale.”
The company took the decision to stop selling leases containing 10-year doubling ground rent clauses on new developments from 2012. In 2017 Taylor Wimpey set aside £130 million towards helping convert customers’ leases into those that were “materially less expensive”.
Countryside said it has sold no properties with doubling ground rent clauses since 2017 and it introduced the Ground Rent Assistance Scheme in 2020 to assist leaseholders whose ground rents doubled more frequently than every 20 years.
The company added: “We will continue to engage constructively with the CMA to resolve this complex issue. Alongside these discussions, its resolution will require the engagement of a number of other parties, including certain freehold owners, for a satisfactory solution to be found.”
The update comes after the CMA in September said it was looking into practices by housebuilding giants Barratt, Countryside, Persimmon and Taylor Wimpey.
The watchdog said at the time it believed the companies may have broken consumer protection law in relation to leasehold homes. It had said it was launching enforcement action after it found evidence of unfair terms concerning ground rents in leasehold contracts and mis-selling.
The CMA today said as part of its review of the leasehold sector, it will also continue to investigate certain firms – such as investment companies – which bought freeholds from these developers and have continued to use the same leasehold contract terms. Its investigation into Barratt and Persimmon is also ongoing.
