Good news on ground rents

Good news for leaseholders is a bit thin on the ground at the moment. But the announcement that, finally, some action is being taken on unfair ground rents is cause for celebration.

The Competition and Markets Authority confirmed yesterday that Aviva and Persimmon are the first major companies to commit to repairing some of the damage done to homeowners by enforcing contracts that include unfair ground rent terms.

Aviva says it will remove the terms from its leasehold contracts which cause ground rents to double, while Persimmon will now offer leasehold house owners the opportunity to buy the freehold of their home at a discounted price.

It’s about time we saw some genuine action on this front. The CMA has been carrying out investigations into ground rents for some time, launching enforcement action against four housebuilders in September last year. Persimmon Homes was one of the developers to be named and shamed by the CMA. The others were Barratt Developments, Countryside Properties and Taylor Wimpey. The CMA has also been investigating several investment firms that bought a large number of freeholds from two of these developers and have continued to use the same ground rent terms.

In tandem with new legislation introduced in the Queen’s speech in May to restrict ground rents to zero, this is a step in the right direction for leasehold homeowners. We hope other housebuilders and investors will now follow suit.

Doubling of ground rent was always grossly unfair and unscrupulous and we are glad to see the abuse outlawed for leasehold houses. But we would argue that in the flats market, ground rent has an important role to play in keeping building owners invested in their properties. With no ground rent payable, and therefore no financial gain to be made from their blocks, there is a risk that freeholders may take less interest in the condition of their buildings, and in health and safety or compliance issues. And that’s not good news for anyone.

24/06/2021
Author : Maryanne Bowring

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