Countryside springs leasehold trap

leasehold ground rent houses

An investigation began in 2019 to investigate leaseholds, after millions of leaseholders faced massive increases in ground rents and the cost of buying the freehold to their property.

Leasehold ground rents on new properties average around £250 per year initially, meaning the policy of doubling ground rents can soon add up over a period of years.

The disproportionate leasehold increases came into effect every ten years and would soon make some properties unsellable, due to the leasehold trap.

In September 2020, the Competitions and Markets Authority began enforcement action that would address the practice of doubling ground rents. The CMA slated housing developers, including Countryside and Taylor Wimpey, who it said used “possibly unfair contract terms”.

Countryside has now announced that the terms of contract that formed the leasehold trap will be scrapped. The house builder will no longer sell properties with ground rents that double and will also remove the terms that specified that ground rents would increase in line with the Retail Price Index (RPI).

After the announcement, the CMA’s chief executive praised the leaseholder’s response, saying that leaseholders of Countryside’s properties could now ‘breath a sign of relief’. Andrea Coscelli said: “No one should feel like a prisoner in their home, trapped by terms that mean they can struggle to sell or mortgage their property. We will continue to robustly tackle developers and investors, as we have done over the past two years, to make sure that people aren’t taken advantage of.”

While some large building developers have already changed the terms of their leasehold terms, others remain under investigation, including Persimmon Homes and Barratt Developments, which the CMA criticised in September 2020 for possibly mis-selling leasehold homes.

Leaseholds are often sold on by house builders to investors, including Aviva, which said it would repay those home owners whose ground rents had doubled.

Some home owners had less praise for the house builders that had made the changes, after years of campaigning for the practice to change. Many had used solicitors to buy their properties, yet were unaware of the onerous clauses until years after buying their homes.

One home buyer expressed his disappointment that Countryside had not admitted any liability, and  there are currently no plans to compensate those already affected.

Mr Coscelli said that those house builders and freehold investors that refused to remove the clauses from contracts would be pursued in the courts by the CMA.

The government has already committed to changing legislation that will end the practice, by setting the ground rents of new leasehold contracts at zero.