Thousands of people who bought leasehold homes from the housing developer Countryside Properties will be freed from costly contract terms, following an investigation by the Competition and Markets Authority.
The CMA, which has been looking into the practice by Countryside and other property developers of doubling ground rent every 10 to 15 years, said it would take further action – including court proceedings – against any developers that did not “do the right thing by their leaseholders” and remove problematic causes from their contracts.
The contractual cost increases can leave some house owners struggling to sell or mortgage their homes while their rights to their property can also be at risk if they fall behind on ground rent payments.
Following the CMA investigation, Countryside Properties has voluntarily given formal commitments to the watchdog to remove terms from its leasehold contracts that cause ground rents to double.
The company will also remove terms from updated contracts that meant the ground rent increased in line with the higher retail prices index measure of inflation. Affected leaseholders’ ground rent will now remain at the amount charged when they bought their home and will not increase over time.
Countryside confirmed that it no longer sells leasehold properties with doubling ground rent clauses.
The announcement comes a year after the CMA launched enforcement action against four housing developers – Countryside, Taylor Wimpey, Barratt Developments and Persimmon Homes – which it believes may have broken consumer protection law in relation to leasehold homes.
The insurance group Aviva, which bought freeholds from developers, agreed in June to remove ground rent terms that were considered unfair and repay homeowners whose rents doubled after the CMA’s investigation.
The housebuilder Persimmon also agreed at the time to offer leasehold homeowners the opportunity to buy the freehold of their property at a discounted price, and to make repayments to some homeowners who bought their freeholds.
The CMA wrote to Countryside and Taylor Wimpey in March, asking them to remove the ground rent terms from their contracts.
Andrea Coscelli, the CMA’s chief executive, said: “Leaseholders with Countryside can now breathe a sigh of relief knowing they will no longer be forced to pay these doubling ground rents. No one should feel like a prisoner in their home, trapped by terms that mean they can struggle to sell or mortgage their property.”
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Coscelli called on Taylor Wimpey and other developers to “do the right thing by their leaseholders and remove these problematic clauses from their contracts”.
He added: “If they refuse, we stand ready to step in and take further action – through the courts if necessary.”
Countryside said it had not sold any properties with doubling ground rent clauses since 2017. It added that it expected to put aside a further £5m to cover the ground rent assistance scheme, taking its total provision for the scheme to £15m.
Iain McPherson, Countryside’s chief executive, said: “Countryside has engaged extensively and constructively with the CMA throughout the course of its review to reach this positive outcome for affected leaseholders.”
As part of its review of the leasehold sector, the CMA said it was continuing its investigation into Barratt Developments and Taylor Wimpey.
In addition, the watchdog is looking into investment groups Brigante Properties, Abacus Land and Adriatic Land. Earlier in the year, it wrote to the firms about its concerns, and requested they remove doubling ground rent terms from their contracts.
Mike Amesbury, the shadow housing minister, welcomed the CMA’s announcement, but called on the government to tackle what he called the “leasehold scandal”, in which “ever more innocent homeowners are being trapped in feudal leasehold homes, facing extortionate fees, poor service and restrictive contract terms without recourse”.
“We cannot wait for the CMA to investigate every abuse of leasehold. The government must finally bring forward leasehold reform, which has been promised for years,” Amesbury said.
Leaseholders affected by onerous ground rents, as well as service charges, increasing insurance costs and combustible cladding, will gather outside parliament on Thursday to draw attention to their cause.