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Peppercorn ground rent
In May, we reported on plans announced in the Queen’s Speech to “prevent the practice of onerous and escalating ground rents from affecting future leaseholders”. The Leasehold Reform (Ground Rent) Bill will also ensure that “for the first time ground rents in new residential long leases will have no financial demand”, and that “leases will be set in law at a genuine peppercorn level”. In short, if and when the Bill becomes law, it will prevent leaseholders of new, long residential leases from being charged a financial ground rent for no tangible service.
Doubling ground rent
Unfortunately, the proposed new legislation will do nothing to help the tens of thousands of leaseholders whose ground rents are doubling every 10 or 15 years. Campaigners say these lease clauses make homes impossible to mortgage or sell.
However, Countryside Properties have become the latest major housebuilder to bow to pressure and commit to amending existing lease terms to maintain ground rents at the same level as at the date of purchase. Their commitment comes in the wake of an investigation by the Competition and Markets Authority (CMA) into four developers – Countryside, Taylor Wimpey, Barratt Developments and Persimmon Homes.
In the case of Countryside and Taylor Wimpey, the investigation centres on their use of “possibly unfair contract terms“. Barratt Developments and Persimmon Homes have come under scrutiny for the possible mis-selling of leasehold homes. The investigation into Barratt Developments and Taylor Wimpey is continuing. In the meantime, Aviva, who buy freehold titles from developers, has pledged to reimburse homeowners who have seen their ground rents double.
Yesterday the CMA announced:
“Countryside has formally committed to make changes for the benefit of leaseholders. Countryside will remove from leasehold contracts certain clauses which caused the ground rents payable by leaseholders to double in price every ten or fifteen years. It will also remove terms which were originally doubling clauses but were converted into RPI-based ground rent terms. The ground rent for affected Countryside leaseholders will remain at the amount it was when the property was first sold and will not increase over time.
“Where Countryside has sold the freehold, and cannot remove the doubling clauses itself, then it will help get them removed at no cost to leaseholders. “This will involve liaising with the current freeholder and making a financial contribution where the freeholder gives formal commitments to the CMA to remove the clauses. Countryside also confirmed that it has stopped selling properties with doubling ground rent clauses and has agreed to provide people with more upfront information about the annual costs of buying a home.”
Protests outside Parliament
This latest announcement by the CMA comes as campaigners headed to London, urging the government to act faster to end what they see as considerable injustices in the leasehold system. They say they feel trapped in their homes, with some feeling suicidal. In describing the current system, one protester said, “It’s just greed, that’s all it is – just greed.”