The Competition and Markets Authority has issued letters to two housing developers in relation to possible breaches of consumer protection law in the sale of leasehold houses. The letters outline the CMA’s specific concerns about the potential unfairness of terms that double the ground rent every 10 or 15 years. The CMA is seeking undertakings from the developers that they will remove such terms from their existing leases and refrain from using them in future leases.
The CMA are continuing their investigations into this sector. PLA Law Reform Committee contributed a report to their deliberations which is available here.
The text of the CMA press release is below.
Law Reform Committee
CMA requires Countryside and Taylor Wimpey to remove leasehold terms
The CMA is requiring Countryside and Taylor Wimpey to remove certain contract terms that mean leaseholders have to pay ground rents that double every 10 or 15 years.
Competition and Markets Authority
19 March 2021
In September 2020, the Competition and Markets Authority (CMA) launched enforcement action against 4 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.
The CMA has 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.
To address the concerns, 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.
Andrea Coscelli, CMA Chief Executive, said:
These ground rent terms can make it impossible for people to sell or get a mortgage on their homes, meaning they find themselves trapped. This is unacceptable. Countryside and Taylor Wimpey must entirely remove all these terms from existing contracts to make sure that they are on the right side of the law.
If these developers do not address our concerns, we will take further action, including through the courts, if necessary.
Housing Secretary Robert Jenrick said:
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.
Countryside and Taylor Wimpey now have the opportunity to respond to the CMA’s detailed concerns and avoid court action by signing formal commitments – known as ‘undertakings’ – to remove the ground rent terms from their leasehold contracts.
As part of its review of the leasehold sector, the CMA will also 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.
For people who own, or are looking to buy, a leasehold property, the CMA has produced written and video guidance, which offers advice on a number of issues, including what people can do when faced with fees and charges they consider unjustified.
For more information on the CMA’s ongoing investigation and for future updates, please visit the leasehold case page.