Thousands of people who bought leasehold homes from the housebuilder Taylor Wimpey will be liberated from terms where their ground rent charges doubled every 10 years, after a long-running investigation by the UK competition watchdog.
The Competition and Markets Authority (CMA) has been looking into the contractual cost increases imposed by Taylor Wimpey and other property developers, which have left some owners struggling to sell or mortgage their homes, while their rights to their property can also be at risk if they fall behind on the payments.
Taylor Wimpey has voluntarily given formal commitments to the CMA that it will remove terms from leasehold contracts that cause ground rents to double in price– a move welcomed by leasehold campaigners.
The company has also agreed to remove terms from contracts that had previously been converted, so that the ground rent increased in line with the higher retail prices index (RPI) measure of inflation.
As a result, affected leaseholders’ ground rents will remain at the amount charged when they first bought their home and will not increase over time.
Taylor Wimpey has also confirmed to the CMA that it has stopped selling leasehold properties with doubling ground rent clauses.
Andrea Coscelli, the CMA chief executive, called the announcement “a huge step forward for leaseholders with Taylor Wimpey”.
He said: “These are totally unwarranted obligations that lead to people being trapped in their homes, struggling to sell or obtain a mortgage.”
The CMA launched enforcement action against four housing developers in September 2020 – Countryside, Taylor Wimpey, Barratt Developments and Persimmon Homes – which it believes may have broken consumer protection law in relation to leasehold homes.
In March, the CMA ordered Taylor Wimpey and developer Countryside Properties to remove the terms in their contracts, and wrote to them giving them the opportunity to sign formal commitments, known as undertakings.
Countryside Properties said in September it was voluntarily removing the terms from its contracts.
The housebuilder Persimmon also agreed at the time to offer leasehold homeowners the opportunity to buy the freehold of their property at a discounted price, and to make repayments to some homeowners who bought their freeholds.
In addition, the insurance group Aviva, which bought freeholds from developers, agreed in June to remove ground rent terms that were considered unfair and repay homeowners whose rents doubled after the CMA’s investigation.
Of the four housebuilders against whom the CMA launched enforcement action in September 2020, only the investigation into Barratt Developments is ongoing.
Coscelli said the CMA was prepared to take further action against companies.
“Other developers and freehold investors should now do the right thing for homeowners and remove these problematic clauses from their contracts. If they refuse, we stand ready to step in and take further action – through the courts if necessary,” he said.
There are more than 4m residential leasehold properties in England and Wales. The National Leasehold Campaign (NLC), a not-for-profit organisation created in 2018 to highlight the problems faced by leaseholders, celebrated the Taylor Wimpey announcement.
The NLC co-founder Cath Williams, a university lecturer from Liverpool who bought a leasehold home from the housebuilder, called the move “a real step forward”.
She said: “It will significantly reduce the cost to buy the freehold or extend the lease and ensures that any leaseholders that have converted to RPI from doubling are treated equitably. It validates what we at the NLC have been saying for years – converting doubling ground rents to RPI is not the answer.”
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Taylor Wimpey’s chief executive, Pete Redfern, said: “Taylor Wimpey has always sought to do the right thing by its customers, shareholders and other stakeholders, and we are pleased that today’s voluntary undertakings will draw this issue to a full close, within our original financial provision.”
The company said it was making a financial offer, agreed with the CMA, to third-party freeholders of leases that Taylor Wimpey no longer owns, to enable their leaseholders to revert to a fixed ground rent.
As part of its review into the leasehold sector, the CMA is continuing its investigation into two investment groups, Brigante Properties, and Abacus Land and Adriatic Land.
