Authority orders developers ordered to remove unfair leasehold terms

The Competitions Market Authority (CMA) is requiring Taylor Wimpey and Countryside Properties developers to remove the terms in their contracts which force leaseholders to pay ground rent which doubles every 10 or 15 years, which breaks consumer protection law.

The action has come as a result of the CMA launching enforcement action against four housing developers. The enforcement action covered two areas:

  • Unfair contract terms – targeting Taylor Wimpey and Countryside Properties
  • Mis-selling of leasehold homes – targeting Barratt Developments and Persimmon Homes

The CMA has now written to Countryside and Taylor Wimpey outlining its specific concerns that their use of terms could mean people can struggle to sell or mortgage their homes, and so find themselves trapped. These terms can also affect their property rights.

To address the concerns, the CMA is requiring the removal of ground rent terms which it thinks are unfair from all existing Countryside and Taylor Wimpey contracts to make sure they are no longer in breach of the law. The companies must also agree not to use the terms again in any future leasehold contracts.

Andrea Coscelli, CMA Chief Executive, said:

“These ground rent terms can make it impossible for people to sell or get a mortgage on their homes, meaning they find themselves trapped. This is unacceptable. Countryside and Taylor Wimpey must entirely remove all these terms from existing contracts to make sure that they are on the right side of the law.

“If these developers do not address our concerns, we will take further action, including through the courts, if necessary.”

Housing Secretary Robert Jenrick said:

“The Government asked the CMA to conduct this investigation. I strongly welcome their efforts to bring justice to homeowners affected by unfair practices, such as crippling ground rents, which have no place in our housing market. This behaviour must end and I look forward to appropriate redress being forthcoming for leaseholders.

“The Government is pursuing the most significant reforms to leasehold in forty years, including by protecting future homeowners, restricting ground rents in new leases to zero and ending the use of leasehold in new houses altogether.”

Countryside and Taylor Wimpey now have the opportunity to respond to the CMA’s detailed concerns and avoid court action by signing formal commitments – known as ‘undertakings’ – to remove the ground rent terms from their leasehold contracts.

As part of its review of the leasehold sector, the CMA will also continue to investigate certain firms – such as investment companies – which bought freeholds from these developers and have continued to use the same leasehold contract terms. Its investigation into Barratt Developments and Persimmon Homes is also ongoing.

For people who own, or are looking to buy, a leasehold property, the CMA has produced written and video guidance, which offers advice on a number of issues, including what people can do when faced with fees and charges they consider unjustified.

For more information on the CMA’s ongoing investigation and for future updates, please visit the leasehold case page.

Jonathan Frankel, litigation partner at Cavendish Legal Group said:

“The action CMA will be seen as a welcome move by all those leaseholders who feel trapped and unable to sell their property due to unfair escalating ground rents.

“It also sends out the key message that leasehold terms are not written in stone, they can be changed. Leaseholders need to be reminded that as consumers they have rights, and they have a legal option to reduce these rents to zero.

“It is also positive news for leaseholders that the scope of the investigation by the CMA includes investment companies buying up property from developers with these contracts baked in, as these are also passed onto the leaseholder.

“We await the full outcome of the investigation and hope it will lead to the next generation of leaseholders being able to buy their homes, without the spectre of escalating ground rents hanging over them.”

Today's Conveyancer