Housebuilder Taylor Wimpey has voluntarily given formal commitments to the Competition and Markets Authority (CMA) to remove terms from leasehold contracts that cause ground rents to double in price every ten years. This has left homeowners struggling to sell or obtain a mortgage on their home, and potentially risking their property rights if they fall behind on rent.
The Law Gazette reports that the developer also removed terms that had originally been doubling ground rent clauses, but 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.
Taylor Wimpey’s commitment follows an enforced action launched by the CMA against four housing developers in September 2020 – Countryside and Taylor Wimpey, for using possibly unfair contract terms, and Barratt Developments and Persimmon Homes for the possible misselling of leasehold homes
As part of this action, the CMA has already helped thousands of leaseholders by securing commitments from Countryside and Persimmon, as well as from an investor in freeholds, Aviva.
Following the CMA’s action, Taylor Wimpey leaseholders affected will see their ground rents remain at the original amount from when the property was first sold, and they will not increase over time. The housebuilder has also confirmed that it has stopped selling leasehold properties with doubling ground rent clauses.
Andrea Coscelli, the chief executive of the CMA, said: “This is a huge step forward for leaseholders with Taylor Wimpey, who will no longer be subject to doubling ground rents.”
She explained that the clauses are unwarranted obligations that have left people feeling trapped in their own homes, and struggling to sell or get a mortgage.
She added that she hopes other developers and freehold investors now do the right thing for homeowners and remove the problematic clauses from contacts, but the CMA is ready to step in and take further action if necessary.
“Of the four developers against whom the CMA opened a case in September 2020 three have now settled with the CMA. Only the investigation into Barratt Developments is still ongoing,” Coscelli said.
Secretary of State for Levelling Up Michael Gove said that unfair practices, such as doubling ground rents, have ‘no place in our housing market’, and the reason why the government asked the CMA to investigate.
“This settlement will help to free thousands more leaseholders from unreasonable ground rent increases and other developers with similar arrangements in place should beware, we are coming after you,” he said.
As part of its review of the leasehold sector, the CMA is continuing to investigate two investment groups, Brigante Properties and Abacus Land and Adriatic Land, after it wrote to the firms earlier this year setting out its concerns and requiring them to remove doubling ground rent terms from their contracts. The CMA’s investigation into Barratt Developments is also continuing.
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