And at last Redrow, Vistry (Bovis), Miller Homes and Crest Nicholson are dragged into the investigation
More than 20,000 leasehold owners have benefited from the Competition and Markets Authority action over the ground rent mis-selling scandal, which was prompted by LKP exposing the issue from 2015.
As a result of further Competition and Markets Authority action announced today thousands more leaseholders who were tricked into doubling ground rent leases will get their money back. Another nine freehold owning companies will now remove these costly terms from the leases.
The move will impact over 5,000 households throughout the UK, with many who paid a doubled rent receiving a refund.
Sir Peter Bottomley MP, a patron MP of LKP, welcomed the news: “LKP are brilliant; others were soooo slow! Thank you and your collaborators.”
LKP first alerted ministers and officials to these wealth-eroding, problematic ground rents – and the scourge of opportunistic and unnecessary leasehold houses in June 2015.
LKP has reported a number of ground rent abuses by all these groups. Here is an example of Vistry’s impossible lease terms in Bristol:
All nine freehold owning companies named by the CMA today 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).
If you wish to provide information to the CMA please use one or more of the following email addresses below:
leasehold@cma.gov.uk
Groundrents.leasehold@cma.gov.uk
Servicecharges.leasehold@cma.gov.uk
Permissionfees.leasehold@cma.gov.uk
Misselling.leasehold@cma.gov.uk
Miscellaneous.leasehold@cma.gov.uk
The sector regarded this inadequate measure as resolution of the issue: RPI leases, especially in a period of high inflation like now, can be more aggressive and unpayable than simply the 10-year doublers, which equate to more than 7 per cent annual compound interest.
RPI ground rents allowed potential buyers of these properties to obtain mortgages on the title, allowing the original leaseholders to move on with their lives, but leaving a toxic asset lingering in the housing market.
The CMA says:
“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 – i.e. when the property was first sold – and this will not increase over time. The 9 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.”
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.”
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 7 leading housing developers – and businesses who purchased freeholds from these firms – have led to landmark changes:
August 2022: 9 businesses who purchased freeholds from Taylor Wimpey commit to remove problematic doubling terms. Developers Crest Nicholson, Miller Homes, Redrow and Vistry agree to help remove doubling terms from leasehold contracts they sold on.
March 2022: 15 businesses who bought freeholds from Countryside remove doubling ground rent terms.
December 2021: Taylor Wimpey removes doubling ground rent terms, and RPI-based terms that were originally doublers, from all its contracts.
September 2021: Countryside Properties removes doubling ground rent terms in relation to freeholds it owns.
June 2021: Persimmon offers leasehold house owners the opportunity to buy the freehold of their property at a discounted price that better reflects what they expected when they originally bought their home.
June 2021: Aviva removes doubling ground rent terms in relation to freeholds it bought.
Additional Notes:
1. The undertakings have been provided to the CMA voluntarily and without any admission of wrongdoing or liability. It should not be assumed that any of the 9 businesses have breached the law – only a court can decide whether a breach has occurred.
2. Crest Nicholson, Redrow, Miller and Vistry are cooperating with the CMA by working with freeholders to remove doubling clauses from their leases. Vistry PLC includes Galliford Try, Linden and Bovis Homes, which it acquired in 2020.
3. The 9 businesses who purchased freeholds from Taylor Wimpey and have provided undertakings are: a) BDP Freehold Limited; b) Mortgage Incentive Funds Limited; c) The Bridges (Darlington) Management Company Limited; d) Bessant Properties Limited; e) Brigante Properties Limited; f) Furatto Limited and Long Term Reversions No 1 Limited; g) SF Ground Rents No18 Limited, SF Ground Rents No 15 Limited and RMB 102 Limited; h) Sarum Properties Limited; i) Taylor Court Limited
4. The businesses who purchased freeholds from Taylor Wimpey and have not provided undertakings yet are listed below. The CMA is continuing to engage with these firms: a) Island Apartments Freehold Limited; b) Madison Close Freeholders Limited; c) Elmdon Real Estate LLP; d) Abacus Land 1 (Holdco 1) Limited, Abacus Land 4 Limited and Adriatic Land 1 (GR3) Limited (part of the Abacus Land and Adriatic Land investment group); e) Plaza 2 Surbiton Limited
5. Following our update on 18 March 2022, the CMA has now concluded its discussions with 2 remaining freeholders who had purchased Countryside leases. Freeholders D.A.T.S. (Holdings) Limited and Wallace Estates Limited have now both given similar commitments to make changes for the benefit of leaseholders.
6. The main provisions of consumer protection legislation relevant to the CMA’s concerns about ground rent terms are the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs), for contracts entered into before 1 October 2015, and Part 2 of the Consumer Rights Act 2015 (CRA), for contracts entered into on or after 1 October 2015. The UTCCRs and Part 2 of the CRA aim to protect consumers against unfair contract terms, and require contract terms to be fair and transparent.
Related posts:
Last year: £64.8bn leasehold properties sold. £13.7bn was new-build. Leasehold house numbers double. Developers make £300-500 million a year from ground rent sales
CMA forces Countryside Properties plc to strike out doubling ground rents: it was selling them as late as May 2017!
CMA slaps down doubling ground rents of 15 punters who bought cheating freeholds from Countryside Properties plc
Taylor Wimpey more greedy than the ground rent ‘Mr Smallweeds’ (and so are other plc housebuilders)
CMA forces Taylor Wimpey to sort out rip-off ten-year doubling ground rents
Barratt off the hook from CMA over mis-selling leasehold homes
We have a ground rent linked to RPI and goes up every 10 years
why is this not also being sorted out. Inflation is going crazy and its simply not fair
We were not told about it when we bought and the freeholder says its not their fault because it is in the lease . These rents need to be scrapped immediately otherwise many will suffer.
You bought a leasehold property, and a solicitor acted for you. The ground rent terms would have been set out in the lease. The rent rises by inflation, and it is common for those terms to form one of the schedules in the lease.
Your solicitors did not draw it to your attention, which is a failure. They fully disclosed the rental terms, and either you, as the original grantee, accepted those terms, or you took an assignment of the lease knowing/ or should have known what the rent was. The concept of having a cost linked to inflation is not unreasonable – we expect the state pension to rise in line with the RPI. In salary, negotiations matching inflation is a term commonly sought. Therefore, it is your solicitor to who you should be seeking damages. The freeholder only seeks the rent set out in the lease.
The ground rent is an integral part of the consideration sought.
Scrapping existing ground rents without adequate compensation to the freeholder would have far-reaching consequences – we have an advanced legal system in this country, and our contract law is respected worldwide. We are seen as a very stable and trustworthy country. If contracts, such as leases, which have obligations imposed on them to pay another, are scrapped because one party ( despite being legally represented) fails to take on board the terms, it would open the floodgates to various other contracts and leases where one party feels aggrieved because perhaps the economic landscape has changed and they find those terms now unpalatable. Or that the contract was drafted in legal speak, making it difficult to understand
If I agree to terms in a contract, then I would like to think I have the moral backbone to honour them. Arguing it was in legal speak, or that it is now an outdated custom, it is for no service, or I had no choice but to sign up seems relatively weak and lame.
Cases, where a solicitor failed to act impartially are, of course, grounds for action. Also, where the terms are drafted to catch people out may well need to be altered if it can be shown that the rent and the premium are well more than what would ordinarily be paid.
But in all other cases where a premium for a lease is sought and a ground rent reserved, which is made clear at the outset, I think that should stand. The fact it rises by inflation is a perfectly reasonable expectation. The refinement that should have applied when ground rents were created and perhaps should apply to sales of pre-June 2022 leases is that the financial burden of the ground rent should be valued and shown next to the premium/ price paid. So the purchaser can consider the terms BEFORE committing to the purchase.
Ideally, in your case, the contract should have shown the price for the property, and the NPV (net present value) of the ground rent with the two figures totalled together with SDLT applied to the total. You would then have questioned why I am paying a premium of £250,000 when the contract price is £260,000. The answer would have been – but there is a ground rent to pay of, say £350 per annum linked to inflation, and if you wanted to rid yourself of that now, you would have to pay a figure of around £10,000.
Knowing this BEFORE entering into the contract would have avoided you feeling “cheated.”
Crispin Blunt CONSERVATIVE MP for leafy Reigate:
“Present-day “onerous ground rents” are, more likely than not, the resultant of unconscionable conduct carried out by one sector of society who have superior information flow (developers, freeholders’ funds, financiers, solicitors) at the expense of an unsuspecting and more naive part of society (consumer homebuyers).”