Breakthrough in ground rents and leasehold controversy

A probe by the Competition and Markets Authority has led housebuilder Taylor Wimpey to make changes for the benefit of leaseholders. 

Taylor Wimpey will remove from leasehold contracts certain clauses which caused the ground rents payable by leaseholders to double in price every 10 years. 

It will also address lease terms which were originally doubling clauses but were converted into RPI-based ground rent terms. The ground rent for affected Taylor Wimpey leaseholders will remain at the amount it was when the property was first sold and will not increase over time.

Where Taylor Wimpey has sold the freehold, and cannot remove the doubling or increase clauses itself, then it will help get them removed at no cost to leaseholders. 

This will involve liaising with the current freeholder and making a financial contribution where the freeholder gives formal commitments to the CMA to remove the clauses. 

Taylor Wimpey also confirmed that it has stopped selling properties with doubling ground rent clauses and will provide people with upfront information about the annual costs of buying a home.

The move comes after the CMA launched enforcement action against four housing developers in September 2020. 

These were Countryside and Taylor Wimpey, for using possibly unfair contract terms, and Barratt Developments and Persimmon Homes over the possible mis-selling of leasehold homes. As part of this action, the CMA secured commitments from Countryside and Persimmon, as well as from an investor in freeholds, Aviva.

An investigation into Barrett Developments is continuing.

Secretary of State for Levelling Up Michael Gove says: “Unfair practices, such as doubling ground rents, have no place in our housing market - which is why we asked the CMA to investigate and I welcome their success in holding these major industry players to account.

“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.

“We continue our work to protect and support all leaseholders and our legislation to restrict ground rents in new leases to zero will put a stop to such unfair charges for future homeowners once and for all.”