Two of Britain’s largest house builders have reacted sharply to calls by Housing Secretary Robert Jenrick and the Competition and Markets Authority for them to remove unfair ground rent terms from their contracts.
As we reported on Friday, the CMA singled out Countryside and Taylor Wimpey, telling them in a public statement to change their leasehold contract terms; Jenrick tweeted his support for the move.
The CMA says "unfair" terms, which double ground every 10 to 15 years, "trap" people, making it hard or impossible for them to sell.
However, the companies have hit back saying they have already taken steps to address the issue.
Countryside says it’s "sold no properties with doubling ground rent clauses since 2017" and that it had an assistance scheme for people whose charges doubled more than every 20 years and would "continue to engage constructively with the CMA to resolve this complex issue.”
Meanwhile Taylor Wimpey’s reaction was: "We will continue to cooperate with the CMA and work with them to find a satisfactory resolution, within the required timescale” and claimed it had stopped selling leases that doubled ground rent every 10 years on new developments from 2012.
In 2017 Taylor Wimpey launched a voluntary help scheme that covers the cost of converting terms so ground rents are linked to rises in the retail price index measure of inflation and set aside £130m to cover the cost of lease conversions - it claimed over the weekend that a "significant number" of its customers had used the scheme, which is still in operation.
"These ground rent terms can make it impossible for people to sell or get a mortgage on their homes, meaning they find themselves trapped" says CMA chief executive Andrea Coscelli.
"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" he adds.
The watchdog is also looking into Barratt Developments and Persimmon Homes contracts.
A litigation partner at Cavendish Legal Group, Jonathan Frankel, says: “The action by the 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.”
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These issues have come back to bite the big developers with a vengeance.
'Crocodile tears' springs to mind. The idea of developers ripping off couples with a second bite of the cherry on the sale of houses has always been a repugnant one.
In terms of the Ground Rent Scandal, it should not be forgotten, that developers put buyers and their lawyers under the most enormous pressure to accept one-sided leasehold schemes.
So, I have zero sympathy for the position these companies now find themselves in.
Greed has come back to bite these developers. No justification for leasehold houses at all, and flats should be Commonhold not leasehold, as used everywhere else in the world except England and Wales. Home buyers want to own their homes and have control over the costs of running them, not have some 3rd party entity continually putting it's hand in their pockets.
Incredible how many people are still not aware that leasehold means you do not really own your home, and estate agents and solicitors do not point this out to prospective buyers or make them fully aware of the issues with leasehold tenure.
Do we believe Countryside and Taylor Wimpey that they've sold no homes with doubling ground rents for many years? I'm sceptical, given how ingrained the practice was and how it only really came to light in 2017-18 with the breaking of the leasehold scandal.
Good to see the CMA has finally found its teeth, at any rate. The biggest developers have certainly been guilty of greed in recent years - the controversial bonus/pay packet of the head of Persimmon tells us that much - and it's only right that such practices as doubling ground rent are clamped down, as it seems leasehold reform from the government is still some way off in reality. Plenty of warm words, but limited parliamentary time and freeholder backlash will slow things down.
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