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‘Thousands’ of leaseholders freed to sell or remortgage their homes, CMA reveals

Competition regulator has secured agreement to cancel dodgy 'doubling ground rent' clauses from leaseholds from 15 companies who bought freeholds from developer Countrywide.

Nigel Lewis

cma ground rent

Thousands of leaseholders have been freed from unfair increasing ground rent terms by a new initiative by the Competition and Markets Authority (CMA).

These leaseholders will now be able to sell or remortgage and see their ground rents remain at the original amount when the property was first sold and will not increase over time.

The announcement follows the CMA securing formal commitments from 15 firms who bought freeholds from housebuilder Countryside to remove terms that cause ground rents to double in price.

These terms, which kick in every 10 or 15 years, mean people often struggle to sell or obtain a mortgage on their leasehold home. Their property rights can also be at risk if they fall behind on their ground rent.

The move comes after the CMA secured similar undertakings directly from Countryside in September last year.

Remove terms

The freehold-purchasing businesses, which include investment firms and housing associations, will also remove terms that had originally been ground rent doubling clauses, but were converted so that ground rent increased in line with the Retail Prices Index (RPI).

The CMA believes that the original doubling clauses were unfair terms and should therefore have been fully removed, not replaced with another term that increases the ground rent.

This announcement comes after the CMA launched enforcement action against four housing developers in September 2020.

These were Countryside and Taylor Wimpey for using possibly unfair contract terms, and Barratt Developments and Persimmon Homes over the possible mis-selling of leasehold homes.

After securing undertakings from Countryside to remove doubling ground rent terms from its contracts, the CMA turned its eye to businesses that bought Countryside freeholds and continued to use the same ground rent terms at the expense of leaseholders. The CMA wrote to these businesses, setting out its concerns and requiring them to remove these terms from their contracts.

cma leashold scandal coscelliAndrea Coscelli (pictured), Chief Executive of the CMA, adds: “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 (pictured) says: “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.

As part of its ongoing review, 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.


March 21, 2022

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