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Leasehold scandal: Top house builders ordered to change contracts

The Competition and Markets Authority has written to two top house builders ordering them to change their leasehold terms.

In September the CMA launched enforcement action against four housing developers. 

These included Countryside Properties and Taylor Wimpey, for using possibly unfair contract terms, and Barratt Developments and Persimmon Homes over the possible mis-selling of leasehold homes.

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This morning the CMA says it’s now written to Countryside and Taylor Wimpey outlining its specific concerns that their use of terms that double the ground rent every 10 or 15 years breaks consumer protection law.

As this increase is built into contracts, it means people can struggle to sell or mortgage their homes, and so find themselves trapped. These terms can also affect their property rights.

So 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.

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

In the morning's statement the CMA adds it will 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.

Housing Secretary Robert Jenrick says:

"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."

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