Mar 19, 2021

Countryside and Taylor Wimpey broke consumer protection law

Groundrents
leaseholds
UK
Dominic Ellis
3 min
Competition and Markets Authority informs Countryside and Taylor Wimpey that doubling ground rent every 10 or 15 years breaks consumer protection law
Competition and Markets Authority informs Countryside and Taylor Wimpey that doubling ground rent every 10 or 15 years breaks consumer protection law...

The Competition and Markets Authority (CMA) has instructed Countryside Properties and Taylor Wimpey not to refer to ground rent terms in future leasehold contracts and that doubling the ground rent every 10 or 15 years breaks consumer protection law.

Andrea Coscelli, CMA Chief Executive, said ground rent terms can make it impossible for people to sell or get a mortgage on their homes, meaning they find themselves trapped, and described the practice as "unacceptable".

"Countryside and Taylor Wimpey must entirely remove all these terms from existing contracts to make sure that they are on the right side of the law. If these developers do not address our concerns, we will take further action, including through the courts, if necessary," he said.

In September 2020, the Competition and Markets Authority (CMA) launched enforcement action against Countryside Properties and Taylor Wimpey, for using possibly unfair contract terms, and Barratt Developments and Persimmon Homes over the possible mis-selling of leasehold homes. Its investigation into Barratt Developments and Persimmon Homes is ongoing.

Housing Secretary Robert Jenrick said he strongly welcomed efforts to bring justice to homeowners affected by unfair practices, such as crippling ground rents, which have no place in our housing market. 

"This behaviour must end and I look forward to appropriate redress being forthcoming for leaseholders. The Government is pursuing the most significant reforms to leasehold in forty years, including by protecting future homeowners, restricting ground rents in new leases to zero and ending the use of leasehold in new houses altogether."

Countryside and Taylor Wimpey now have the opportunity to respond to the CMA’s detailed concerns and avoid court action by signing formal commitments – known as ‘undertakings’ – to remove the ground rent terms from their leasehold contracts.

As part of its review of the leasehold sector, the CMA will also continue to investigate certain firms – such as investment companies – which bought freeholds from these developers and have continued to use the same leasehold contract terms. 

A Taylor Wimpey statement reads: "As we noted in our FY2020 Results Announcement on March 2 March, the CMA's investigation into leasehold remains open and we have now received a letter from the CMA setting out its concerns and confirming that it intends to move to the next stage of formal consultation. We will continue to cooperate with the CMA and work with them to find a satisfactory resolution, within the required timescale."

It added Taylor Wimpey took the decision to stop selling leases containing 10-year doubling ground rent clauses on new developments from January 1 2012 and under GRRAS, Taylor Wimpey covers the cost of converting our customers' lease terms into an RPI-based lease, if they choose to do so. 

Taylor Wimpey set aside funding of £130 million to cover the cost of these lease conversions and it claims a significant number of customers have already taken advantage of this scheme and it remains open. 

A Countryside Properties statement reads: "Countryside has sold no properties with doubling ground rent clauses since 2017 and we introduced the Ground Rent Assistance Scheme in 2020 to assist leaseholders whose ground rents doubled more frequently than every 20 years.  

"We will continue to engage constructively with the CMA to resolve this complex issue. Alongside these discussions, its resolution will require the engagement of a number of other parties, including certain freehold owners, for a satisfactory solution to be found."

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