Builders told to remove ‘unfair’ contract terms
The regulator acts over ground rents
THE COMPETITION and Markets Authority has ordered Countryside and Taylor Wimpey to remove contract terms that mean leaseholders have to pay ground rents that double every 10 or 15 years.
In September 2020, the Competition and Markets Authority (CMA) launched enforcement action against four 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.
In a statement, the CMA said: “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.”
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.
Taylor Wimpey said in a statement: “We will continue to cooperate with the CMA and work with them to find a satisfactory
resolution, within the required timescale.”
The company pointed out it stopped selling leases containing 10-year doubling ground rent clauses on new developments from January 2012 and set aside £130m to cover the cost of conversions for customers to inflationlinked leases.
Countryside said in a statement: “Countryside has sold no properties with doubling ground rent clauses since 2017 and we
introduced the Ground Rent Assistance Scheme in 2020 to assist leaseholders whose ground rents doubled more frequently than every 20 years.
“We will continue to engage constructively with the CMA to resolve this complex issue. Alongside these discussions, its resolution will require the engagement of a number of other parties, including certain freehold owners, for a satisfactory solution to be found.”
I strongly welcome their efforts to bring justice to homeowners. Robert Jenrick, Housing Secretary