Service charges and other issues
A guide to service charges, administration charges, ground rent, recognised tenants associations and forfeiture.
24 August 2022
The Competition and Markets Authority (CMA) announced on 24 August 2022 that it has secured undertakings from 9 companies that bought freeholds from leading housing developer Taylor Wimpey. A further 4 national developers – Crest Nicholson, Redrow, Miller Homes and Vistry – have also agreed to work with the companies who purchased their freeholds to remove doubling terms. The move will impact over 5,000 households throughout the UK, with many who paid a doubled rent receiving a refund.
All 9 firms must now remove problematic contract terms that cause ground rents to double in price every 10 years. These terms can lead to people being trapped in homes they cannot sell or mortgage. The firms will also remove contract terms which were originally doubling clauses, but were converted so the ground rent increased in line with the Retail Price Index (RPI). The CMA believes that the original doubling clauses were unfair and should therefore have been fully removed – not replaced with another term that still increases the rent.
This action brings the total number of homeowners that have benefitted from the CMA’s investigation to over 20,000.
All affected leaseholders will now see their ground rents remain at the original amount – i.e. when the property was first sold – and this will not increase over time. The 9 freeholders have also agreed to refund residential leaseholders who had already paid out under doubled ground rent terms.
Sarah Cardell, interim Chief Executive of the CMA, said:
“For years leaseholders have been plagued by what we believe are unfair practices. That’s why we sought to tackle the problem by launching action against some of the biggest names in the business.
As a result of our work, over 20,000 people now have a new lease of life, freed from issues like costly doubling ground rent terms.”
Secretary of State for Levelling Up Greg Clark said:
“This is good news that will see thousands of leaseholders get the refunds they are entitled to.
Levelling up home ownership and creating a fairer, more transparent leasehold system is a top priority for this government, and these agreements are an example of this in action.
We will work with the CMA to continue challenging industry on its practices, so we can ensure more leaseholders get the fair deal they deserve.”
Since 2019, the CMA has sought to tackle issues around the possible mis-selling of leasehold homes and contract terms it believes are unfair. Its investigations involving 7 leading housing developers – and businesses who purchased freeholds from these firms – have led to landmark changes, before August 2022:
- March 2022: 15 businesses who bought freeholds from Countryside remove doubling ground rent terms.
- December 2021: Taylor Wimpey removes doubling ground rent terms, and RPI-based terms that were originally doublers, from all its contracts.
- September 2021: Countryside Properties removes doubling ground rent terms in relation to freeholds it owns.
- June 2021: Persimmon offers leasehold house owners the opportunity to buy the freehold of their property at a discounted price that better reflects what they expected when they originally bought their home.
- June 2021: Aviva removes doubling ground rent terms in relation to freeholds it bought.
As the investigation moves into the final stages, the CMA is engaging with additional firms, including the Abacus Land and Adriatic Land investment group, which bought freeholds from Taylor Wimpey.
The businesses who purchased freeholds from Taylor Wimpey and have not provided undertakings yet are listed below. The CMA is continuing to engage with these firms:
- Island Apartments Freehold Limited;
- Madison Close Freeholders Limited;
- Elmdon Real Estate LLP;
- Abacus Land 1 (Holdco 1) Limited, Abacus Land 4 Limited and Adriatic Land 1 (GR3) Limited (part of the Abacus Land and Adriatic Land investment group); and
- Plaza 2 Surbiton Limited