House Builders Told to Stop Raising Ground Rent

A Win for the Leasehold Campaigners

The ongoing saga in the leasehold sector has just seen another plot twist, and this time it’s good news for leaseholders.

Leasehold – What Does It Mean?

As a leaseholder, you own a lease that gives you the right to use the property how you wish, within the parameters set out in the lease. However, you are still required to get the landlord’s permission if you want to make changes to the property. The freeholder of the property owns the land, rather than you.

Leasehold Titles do enjoy protection under the law, and as a Leaseholder you can usually obtain and extension to a Leasehold Term of Years.

Despite the fact that leasehold houses or flats are sold for a fixed period of time of usually 99-125 years, leaseholders are still often charged very expensive ground rent. Some people have even seen their ground rent double recently.

Due to these unfair leasehold contract terms, the Competition and Markets Authority (CMA) has been investigating numerous housebuilders since June 2019 amidst concern that leaseholders were facing overwhelming increases in the price of a leasehold property. The CMA has taken the issues very seriously as the housebuilders risked breaching consumer protection laws.

Persimmon and Aviva Will Change how they Operate

Insurance company Aviva buys leaseholds from housebuilders, and they are promising to repay any homeowners who saw their ground rents double.

They have admitted to voluntarily agreeing to amend a ‘small proportion’ of leases with terms that caused ground rents to double every 10 or 15 years. Thankfully, these leaseholders will now just have to pay the initial ground rent they signed up for. If they have already paid any higher fee, Aviva will refund that.

Furthermore, housebuilder Persimmon, who were one of the companies warned by CMA regarding their operations, have announced that they will allow their leaseholders to buy the freehold of their property at a discounted price.

Other housebuilders are expected to take similar steps now, including other companies that have been under the eye of the CMA, such as Taylor Wimpey and Brigante Properties.

Persimmon is also now offering to give homebuyers more time to purchase a property after reservation in order to ensure that buyers don’t feel pressured into the purchase. Pressure sales often result in problems, as homebuyers are sometimes unaware of the annual costs of owning the home. Therefore, more time is needed in the process, so that buyers can fully understand what their costs are going to be.

Great News for Leaseholders

Anees Rehman, Assistant Head of Department of Residential Conveyancing at Wosskow Brown, says: “This is great news for leaseholders, especially those that have already had to fork out for the increase in ground rent. Hopefully, these first moves by Aviva and Persimmon will pave the way for other housing developers to follow suit, reducing the number of leaseholders in tricky situations.

“We at Wosskow Brown have already dealt with numerous applications whereby the Freeholders are voluntarily varying the leases that they grant. Some of the Freeholders are also paying for the Leaseholders’ legal fees and costs, so now is a good time to contact Wosskow Brown to check your lease if you’re unsure, or contact the Freeholder to take it a step further.”

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