Leaseholders who bought a property from Taylor Wimpey have had their toxic ground rent clauses removed.
The housing developer has removed the clauses in purchasers’ leasehold contracts that saw their ground rents double every 10 years.
It is the latest developer to take this step following an investigation into ground rents by the Competition Markets Authority, creating fresh hope for those remaining leaseholders suffering from the problem that can prevent them selling their homes.
That comes after some lenders said that they would no longer lend on such clauses, creating huge problems for affected homeowners.
Homeowners with toxic ground clauses have been left struggling to sell their properties
The decision by these lenders means affected homeowners have been left struggling to sell their properties unless they find a cash buyer.
Some have even been unable to remortgage.
Affected homeowners have been left with effectively worthless assets and are often forced to pay thousands of pounds to remove the clauses – either through a deed of variation or by buying the freehold that would allow them to produce a new lease extension.
Taylor Wimpey voluntary agreeing to remove these toxic ground rent clauses means that owners of properties affected no longer face these struggles.
The developer is also removing doubling ground rent clauses that were converted so that the ground rent increased in line with the inflation (the Retail Prices Index).
The CMA believes that the original doubling clauses were unfair and should have been removed fully rather than be replaced with another term that increases the ground rent.
Leaseholders cannot simply refuse to pay their ground rent if they feel the increases are too much as a leaseholder’s rights can be at risk if they fall behind on their payments.
Affected homeowners have been left with effectively worthless assets and are often forced to pay thousands of pounds to remove the clauses
The Taylor Wimpey move comes after the CMA launched enforcement action against four housing developers in September 2020.
These were Countryside and Taylor Wimpey, for using possibly unfair contract terms, and Barratt Developments and Persimmon Homes over the possible mis-selling of leasehold homes.
As part of this action, the CMA has already helped thousands of leaseholders by securing commitments from Countryside and Persimmon, as well as from an investor in freeholds, Aviva.
Unfair practices, such as doubling ground rents, have no place in our housing market
Secretary of State for Levelling Up Michael Gove
Due to the CMA’s action, affected Taylor Wimpey leaseholders will now see their ground rents remain at the original amount – when the property was first sold – and they will not increase over time.
Taylor Wimpey has also confirmed to the CMA that it has stopped selling leasehold properties with doubling ground rent clauses.
Andrea Coscelli, of the CMA, said: ‘This is a huge step forward for leaseholders with Taylor Wimpey, who will no longer be subject to doubling ground rents.
‘These are totally unwarranted obligations that lead to people being trapped in their homes, struggling to sell or obtain a mortgage. I hope the news they will no longer be bound into these terms will bring them some cheer as we head into Christmas.
‘Other developers and freehold investors should now do the right thing for homeowners and remove these problematic clauses from their contracts. If they refuse, we stand ready to step in and take further action – through the courts if necessary.
‘Of the four developers against whom the CMA opened a case in September 2020 three have now settled with the CMA. Only the investigation into Barratt Developments is still ongoing.’
‘This is the kind of issue that could be resolved at pace and met with fines if the CMA receives the consumer powers that the Government is currently consulting on.’
Secretary of State for Levelling Up Michael Gove said: ‘Unfair practices, such as doubling ground rents, have no place in our housing market – which is why we asked the CMA to investigate and I welcome their success in holding these major industry players to account.
‘This settlement will help to free thousands more leaseholders from unreasonable ground rent increases and other developers with similar arrangements in place should beware, we are coming after you.
‘We continue our work to protect and support all leaseholders and our legislation to restrict ground rents in new leases to zero will put a stop to such unfair charges for future homeowners once and for all.’
As part of its review of the leasehold sector, the CMA is continuing to investigate two investment groups, Brigante Properties and Abacus Land and Adriatic Land, after it wrote to the firms earlier this year setting out its concerns and requiring them to remove doubling ground rent terms from their contracts.
The CMA’s investigation into Barratt Developments is also continuing.