Developer Countryside has voluntarily undertaken to remove terms from leasehold contracts that cause ground rents to double in price, the Competition and Markets Authority (CMA) has revealed.
The effect of these ground rent increases, which kick in every 10 to 15 years, is that people often struggle to sell or mortgage their home and their property rights can be at risk, for example, if they fall behind on their ground rent.
Countryside will also remove terms which were originally doubling clauses but were converted so that the ground rent increased in line with the Retail Prices Index (RPI).
The CMA says the original terms were ‘potentially unfair’ and should have been completely removed, instead of being replaced with another term that still increases the ground rent.
This decision by Countryside follows enforcement action by the CMA against the firm last year, along with Taylor Wimpey, Barratt and Persimmon, and the CMA says it is now expecting these companies to follow Countryside’s lead.
“If they refuse, we stand ready to step in and take further action – through the courts if necessary,” says Andrea Coscelli, Chief Executive of the CMA (pictured).
“Countryside leaseholders will now see their ground rents remain at the original amount when the property was first sold, and the developer has also confirmed that it has stopped selling leasehold properties with doubling ground rent clauses.
Housing secretary Robert Jenrick (pictured) says: “This settlement with Countryside will mean thousands more leaseholders are given the fair treatment they deserve and marks the third major agreement with leading UK developers and investors. I strongly urge others to follow suit and end these historic practices.”
Mark Hayward, Propertymark Chief Policy Advisor, says: “Most consumers are completely unaware that buying a new build directly through a developer leaves them vulnerable and without protection. Unfortunately, many leaseholders get lumbered with escalating costs making these properties expensive to live in and often difficult to sell.
“Propertymark has long called for greater protections for all home buyers and sellers and our research, Leasehold: A Life Sentence? found that 93 per cent of surveyed leasehold homeowners wouldn’t purchase another leasehold property, with 63 per cent feeling they were mis-sold. It’s positive to see the removal of Countryside’s onerous lease terms and this should be a catalyst for the end of prohibitive clauses and greater transparency for buyers.”