The CMA is instructing Countryside and Taylor Wimpey to remove contract terms that mean leaseholders have to pay ground rents that double every 10 or 15 years.
The Competition and Markets Authority (CMA) is instructing Countryside and Taylor Wimpey to remove contract terms that mean leaseholders have to pay ground rents that double every 10 or 15 years.
The companies must also agree not to use the terms again in any future leasehold contracts.
In September 2020, the CMA launched enforcement action against four housing developers.
These included Countryside Properties and Taylor Wimpey, for using unfair contract terms, and Barratt Developments and Persimmon Homes over the possible mis-selling of leasehold homes.
The CMA has now written to Countryside and Taylor Wimpey outlining that continuing to enforce doubling ground rent terms breaks consumer protection law.
Countryside and Taylor Wimpey have the opportunity to respond to the CMA’s detailed concerns and avoid court action by signing formal commitments.
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.
Its investigation into Barratt Developments and Persimmon Homes is also ongoing.
Andrea Coscelli, chief executive of the CMA, said: “These ground rent terms can make it impossible for people to sell or get a mortgage on their homes, meaning they find themselves trapped.
“This is 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.”
Housing Secretary Robert Jenrick, added: “The government asked the CMA to conduct this investigation.
“I strongly welcome their 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.”
Jonathan Frankel, litigation partner at Cavendish Legal Group, said: “Today’s action by the CMA will be seen as a welcome move by all those leaseholders who feel trapped and unable to sell their property due to unfair escalating ground rents.
“It also sends out the key message that leasehold terms are not written in stone, they can be changed.
"Leaseholders need to be reminded that as consumers they have rights, and they have a legal option to reduce these rents to zero.
“It is also positive news for leaseholders that the scope of the investigation by the CMA includes investment companies buying up property from developers with these contracts baked in, as these are also passed onto the leaseholder.
“We await the full outcome of the investigation and hope it will lead to the next generation of leaseholders being able to buy their homes, without the spectre of escalating ground rents hanging over them.”