Thousands of homeowners who have been paying doubled ground rent on their leasehold properties are to receive a refund.
Many of the 5,000 households throughout the UK affected by ‘doubling clauses’ will receive a windfall and will see more money in their pockets each month as ground rents return to their original amount.
The announcement follows action from the Competition and Markets Authority (CMA), which has secured undertakings from nine companies that bought freeholds from leading housing developer Taylor Wimpey.
A further four national developers – Crest Nicholson, Redrow, Miller Homes and Vistry – have also agreed to work with the companies who purchased their freeholds to remove doubling terms.
Homeowners trapped
All nine firms must now remove problematic contract terms that cause ground rents to double in price every 10 years. These terms can lead to people being trapped in homes they cannot sell or mortgage. The firms will also remove contract terms which were originally doubling clauses, but were converted so the ground rent increased in line with the Retail Price Index (RPI).
The CMA believes that the original doubling clauses were unfair and should therefore have been fully removed – not replaced with another term that still increases the rent.
This action brings the total number of homeowners that have benefitted from the CMA’s investigation to over 20,000.
All affected leaseholders will now see their ground rents remain at the original amount and this will not increase over time. The nine freeholders have also agreed to refund residential leaseholders who had already paid out under doubled ground rent terms.
Sarah Cardell, interim Chief Executive of the CMA, said: “For years leaseholders have been plagued by what we believe are unfair practices. That’s why we sought to tackle the problem by launching action against some of the biggest names in the business.
‘New lease of life’
“As a result of our work, over 20,000 people now have a new lease of life, freed from issues like costly doubling ground rent terms.”
Secretary of State for Levelling Up, Greg Clark, said: “This is good news that will see thousands of leaseholders get the refunds they are entitled to.
“Levelling up home ownership and creating a fairer, more transparent leasehold system is a top priority for this Government, and these agreements are an example of this in action.
“We will work with the CMA to continue challenging industry on its practices, so we can ensure more leaseholders get the fair deal they deserve.”
Landmark changes
Since 2019, the CMA has sought to tackle issues around the possible mis-selling of leasehold homes and contract terms it believes are unfair. Its investigations involving seven leading housing developers – and businesses who purchased freeholds from these firms – have led to landmark changes.
As the investigation moves into the final stages, the CMA is engaging with additional firms, including the Abacus Land and Adriatic Land investment group, which bought freeholds from Taylor Wimpey.
Do you need advice on financial matters? Give us a call today for our help.