Over 3,400 leaseholders will no longer have to pay double the amount of ground rents that they should be paying, as a result of the latest intervention by the Competition and Markets Authority (CMA).
Fifteen businesses, which had bought freeholds from housing developer Countryside Properties, have given formal commitments – known as undertakings – to the CMA to remove terms that cause ground rents to double in price every 10 to 15 years.
The businesses, which include investment firms and housing associations, will also remove terms which had originally been ground rent doubling clauses, but were converted so that ground rent increased in line with the Retail Prices Index (RPI).
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The CMA said 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.
“We believe these terms are unjust and unwarranted, and can result in people trapped in homes they are unable to sell or mortgage – a major cause of anxiety and stress for so many,” Andrea Coscelli, chief executive of the CMA, said.
In September 2020, the CMA launched enforcement action against four housing developers, one of which is Countryside, for potentially unfair terms concerning ground rents in leasehold contracts.
Read more: CMA launches enforcement action in relation to leasehold selling practices.
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.
“We welcome the commitment from these businesses to do what is right by their leaseholders by removing these terms, and we will hold them to it. 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,” Coscelli said.
Secretary of State for Levelling Up Michael Gove also welcomed CMA’s success in removing unfair terms against leaseholders.
“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. Homebuyers starting a new lease from this summer will now pay nothing in ground rent costs – setting the path to a more equal future for homeownership. Others must now follow suit, as our work to help all leaseholders continues,” Gove said.