Yahoo Finance Crackdown on UK leasehold deals that see ground rent double every decade
Britain’s competition watchdog has told housebuilders Taylor Wimpey (TW.L) and Countryside Properties (CSP.L) that they are required to remove contract terms that double the ground rent on properties every 10 or 15 years.
The Competition Markets Authority (CMA) said the increase built into contracts meant that people “can struggle to sell or mortgage their homes, and so find themselves trapped”. These terms can also affect their property rights.
In September last year, the regulator launched enforcement action against a total of four housebuilders, which also included Barratt Developments (BDEV.L) and Persimmon Homes (PSN.L), over the possible mis-selling of leasehold homes.
The CMA has written to Countryside and Taylor Wimpey outlining its concerns that their use of terms that double the ground rent every 10 or 15 years breaks consumer protection law.
It said the companies must remove the “unfair” terms from all existing contracts and also agree not to use the terms again in any future leasehold contracts.
“This is unacceptable,” Andrea Coscelli, CMA chief executive, said. “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.”
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Meanwhile, housing secretary Robert Jenrick said: “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."
He added: “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 concerns and avoid court action by signing formal commitments – known as ‘undertakings’ – to remove the ground rent terms from their leasehold contracts.
Taylor Wimpey, the third-largest homebuilder in the UK, said it intended to move to the next stage of formal consultation and would continue to cooperate with the regulator.
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It comes as the UK housing market is experiencing the greatest excess in demand over supply in the past decade, meaning the price of the average property coming to market in March was inflated by 0.8%, or £2,484 ($3,460).
According to data from the Rightmove (RMV.L) monthly House Price Index this week, the number of potential buyers enquiring about each available property in the month also shot up, and is a record 34% higher than the same period a year ago, which was itself an active market before the first lockdown.
Rightmove said that with sales already agreed for almost two out of three properties on agents’ books, buyers are eagerly awaiting fresh choice coming to market, making this the best sellers’ market of the past ten years.
The start of the traditional spring selling period has seen the number of sales agreed for the first week in March up by 12% on prior year despite shortage of available stock.
Rightmove also said it had seen a 40% bump in website visits from February, with more than 7 million viewers heading to the site.
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