Thousands of ‘trapped’ leaseholders to benefit after watchdog investigation

Leaseholders “trapped” in homes they struggle to sell are among thousands set to benefit after Aviva and Persimmon agreed to changes following an investigation by the competition regulator.

Hundreds living in homes whose freeholds are owned by Aviva will be affected after it said it would remove contract terms which allow ground rents to double every 10 to 15 years.

The ground rents will revert to the original amounts and leaseholders who were affected by the “doubling” clauses will be refunded excess amounts paid, the Competition and Markets Authority (CMA) said.

Thousands more will benefit after house builder Persimmon said it would offer leasehold house owners the option to buy the freehold of their property at the discounted price of £2,000.

Anyone who has already bought a freehold from the company at a higher price will receive a discount, under the agreement.

It follows concerns that homeowners been led to believe they could buy their freehold at a certain price “only to find out later that this price had increased by thousands of pounds with no warning”.

CMA chief executive Andrea Coscelli said: “This is a real win for thousands of leaseholders – for too long people have found themselves trapped in homes they can struggle to sell or been faced with unexpectedly high prices to buy their freehold.

“We now expect other housing developers and investors to follow the lead of Aviva and Persimmon.

“If not, they can expect to face legal action.”

Housing secretary Robert Jenrick said practices such as doubling ground rent “have no place in our housing market” and hailed the settlement as a “hugely important step”.

“We have also introduced legislation that will protect future homeowners by restricting ground rents in new leases to zero and I would strongly urge other developers to follow suit in amending their historic practices,” Mr Jenrick said.

The settlement follows the CMA’s launch of enforcement action in September against housing developers Countryside Properties and Taylor Wimpey for using potentially unfair contract terms and Barratt and Persimmon over the possible mis-selling of leasehold properties.

In connection with this it has also been investigating investment firms, including Aviva, that bought a large number of freeholds from Countryside and Taylor Wimpey.

It has now written to the investment groups other than Aviva setting out its concerns and “requiring them to remove doubling ground rent terms from their contracts”.

The CMA said its investigation into Countryside, Taylor Wimpey, Barratt, and those investment groups – Brigante Properties, Abacus Land and Adriatic Land – remained ongoing adding that “it should not be assumed that they have breached the law”.

Responding to the CMA announcement, Persimmon said it had not historically sold leasehold homes in high volumes and largely stopped doing so in 2017.

It said the agreement largely extended existing schemes in place to enable leaseholders to buy their freeholds at below market value.

The CMA wrote to Countryside and Taylor Wimpey in March warning them they could be breaking the law if they continue to include unfair ground rent terms in contracts for new homes.

Campaigners have called for the end of leasehold sales for new-build properties.

Flats are often sold as leaseholds with the freehold held by a separate owner, often the builder, who is entitled to charge ground rent to the homeowner.

The government has pledged to reform the system.