Industry responds to ground rent commitments from developers
The Competition and Market’s Authority reported yesterday that developers Persimmon and Aviva will commit to making changes to their ground rent terms, removing the terms which cause ground rents to double. In the case of Aviva, it has committed to repay affected homeowners.
In May, the Queen’s Speech introduced proposals for planning and leasehold reform in which ground rents on leasehold could be abolished.
The industry has responded positively to the news. Mark Hayward, Chief Policy Adviser, at Propertymark has shared his thoughts:
“This is another positive step in remedying the leasehold scandal that has impacted far too many people for so long. Leasehold house owners have lived with untold anxiety, knowing that their homes were essentially unsellable. The CMA’s action will help those whose freeholds are with Aviva and Persimmon; other house developers and investors must now commit to make similar undertakings to ensure all leasehold house owners can move forward with their lives. Our Leasehold: A Life Sentence research found that 57 per cent of leaseholders had no idea what buying a leasehold home meant until after they had gone through with the purchase and 94 per cent regret doing so.”
Katie Cohen, residential property law partner at Keystone law and a specialist in leasehold enfranchisement adds
“The commitment by Aviva and Persimmon shows that the future of doubling ground rents is very much numbered. This of course goes hand in hand with the current Ground Rent Bill working through Parliament which will abolish ground rent for all leaseholds going forward.
This is certainly encouraging news for leaseholders who have been held to ransom over adverse ground rent terms that have made mortgageability and saleability difficult. It also remains to be seen whether other developers and ground rent investment companies will follow suit and what the full extent of the impending changes mean to the arena of leaseholds overall.”
But Jonathan Frankel, leasehold enfranchisement specialist from Cavendish Legal Group, warns that the proof will be in the pudding, and the proposed discounts for leaseholders wanting to buy their freehold must be monitored closely to ensure those affected do not continue to be unfairly punished.
“This is a welcome announcement, but much like the announcement at the start of the year by the Government on changes to leasehold rules, it is lacking in detail.
“The decision by Aviva and Persimmon should ensure other housebuilders follow suit, but the question is how long will homeowners have to wait before they see these words turned into action.
“As specialists in the area of leasehold enfranchisement, we would like to see just how, and particularly when, these two huge players will change their procedures to allow leaseholders to buy the freehold – and crucially, at what discount?
“Leaseholders feeling trapped by escalating ground rents and unsellable homes, deserve clarity and a timeframe for this, along with a clear commitment from the Government on when they will be implementing the changes announced in January.
“This may be the start of a journey to a fairer system for leaseholders, but I suspect there is still a long road ahead and it’s vital for leaseholders to get the right advice now.”