Leaseholders freed from unfair contract terms

Leaseholders with Countryside Properties will no longer be subjected to ground rents that double every 10 or 15 years.

The effect of these increases is that people often struggle to sell or mortgage their home and their property rights can be at risk, for example, if they fall behind on their rent.

Countryside will also remove terms that were originally doubling clauses but were converted so that the ground rent increased in line with the Retail Prices Index (RPI).

The Competition and Markets Authority (CMA) believes the original terms were potentially unfair and should therefore have been fully removed, instead of being replaced with another term that still increases the ground rent.

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.

The CMA has already secured commitments from Persimmon and Aviva as part of this action, helping thousands of leaseholders.

Countryside Properties – one of the UK’s leading housing developers – has now voluntarily given formal commitments to the CMA to remove terms from leasehold contracts that cause ground rents to double in price.

Due to the CMA’s action, affected Countryside leaseholders will now see their ground rents remain at the original amount – i.e. when the property was first sold – and this will not increase over time.

Countryside also confirmed to the CMA that it has stopped selling leasehold properties with doubling ground rent clauses.

The CMA points out that these undertakings have been provided voluntarily and without any admission of wrongdoing or liability. It should not be assumed that Countryside has breached the law – only a court can decide whether a breach has occurred.

Andrea Coscelli, Chief Executive of the CMA, said: “No one should feel like a prisoner in their home, trapped by terms that mean they can struggle to sell or mortgage their property. We will continue to robustly tackle developers and investors – as we have done over the past 2 years – to make sure that people aren’t taken advantage of.

“Other developers, such as Taylor Wimpey, and freehold investors now have the opportunity to do the right thing by their leaseholders and remove these problematic clauses from their contracts.

If they refuse, we stand ready to step in and take further action.”

Please contact us if you would like advice about the legal aspects of buying or selling a home.