Housebuilders Told To Remove Unfair Ground Rent Terms From Leasehold Agreements

Following an investigation, the Competition and Markets Authority (CMA) has told UK housebuilders, Countryside and Taylor Wimpey, to alter terms in their leasehold agreements or risk facing legal proceedings.

The terms of particular relevance relate to “unfair” ground rent charges which double every 10 to 15 years. The CMA believe these terms are being used to “trap” leaseholders, who find it difficult to sell or mortgage their homes after they have entered into a leasehold contract.

The CMA has stated that these ground rent terms may break consumer protection law and must be changed or removed and not used again.

Andrea Coscelli, Chief Executive of the CMA, commented on the investigation’s findings into Countryside and Taylor Wimpey:

“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.”

Countryside and Taylor Wimpey have both said that they have already taken steps to address this issue with their leasehold agreements.

The CMA is also investigating the way in which Barratt Developments and Persimmon Homes have been selling leasehold agreements.

Calls for leaseholds to be banned on new build properties

In recent years, many have called for there to be a ban put in place with regards to leaseholds for new build homes.

The Government has previously stated that it is looking to do this, with the Housing Secretary, Robert Jenrick, having said that unfair leasehold terms, including doubling ground rent costs, have “no place in our housing market“. Mr Jenrick added:

“This behaviour must end and I look forward to appropriate redress being forthcoming for leaseholders.”

Leasehold scandal

Over the last few years, there have a number of CMA investigations and other reports concerning unfair fees in leasehold arrangements.

In the 2000’s, developers started selling homes on a leasehold, rather than freehold, basis – often without the buyer fully understanding the contracts they were entering into. In some cases, the freeholds were then sold to offshore investors, who have since demanded large sums from homeowners to buy out these contracts.

Onerous ground rent charges and other costs

When a home is sold as a leasehold, the buyer owns only the house itself. The freeholder owns the land, meaning the buyer must pay ground rent annually, which is meant to reflect the value of occupying the land/ground.

The purchaser occupies the property on the terms set out in a legal agreement called a lease. The leases granted by the housebuilders to buyers are usually for long periods, such as 250 years or 999 years.

In recent years, housebuilders have been selling new build properties to buyers on a leasehold basis, meaning the housebuilder retained ownership of the freehold. In many cases, housebuilders then went onto sell the freeholds to third parties, such as investment companies.

Historically, ground rents have been low – no more than around £50 per year. However, in the last few years, housebuilders have started to increase ground rents to an initial charge of between £250 to £500 a year.

They have also added clauses in the lease that allow them to review the ground rent periodically, for example, every five, 10 or 25 years. Typically, the review clause allows the freeholder to increase the ground rent at each review.

In theory, a ground rent that doubles every 10 years doesn’t sound too bad. However, most leases are set for a long term, such as 999 years. If a ground rent of £250 per year doubles every 10 years, the leaseholder can expect to pay £16,000 per year after 60 years!

Other payments provided for in long leases can include fees charged by the freeholder to the property, such as building an extension or for agreeing to a re-mortgage of the property. Ownership returns to the freeholder when the lease comes to an end.

Difficulties selling leasehold properties

Due to the national publicity of the scandal in recent years, many buyers are now aware of the problem and unfortunately, will not buy a property with an onerous ground rent clause. The existence of such clauses has also led to banks and building societies refusing to lend on those properties.

This means that in the unlikely event that a buyer is still prepared to buy a property affected by a ground rent clause, they are highly unlikely to be able to obtain a mortgage to complete the purchase. This clearly has a huge effect on the value of these properties, and, in some cases, they may well be worthless.

Even to a cash buyer, a property affected by the onerous ground rent terms will be unattractive, as the burden of the clause will be inherited via the purchase.

Ground rent claims

Leaseholders who have to pay excessive amounts of ground rent due to onerous clauses in their leases, may be able to a claim for professional negligence against the solicitor that acted on their purchase for failing to advise them of the problems with the ground rents.

If you are a leaseholder and you think you may have an escalating ground rent clause in your lease, you may be able to bring a claim.

How can Nelsons helpCountryside Taylor Wimpey leasehold

Daniel Brumpton is a Partner in our expert Dispute Resolution team, specialising in ground rent claims.

At Nelsons, we’re ready to help people who have found themselves unwillingly involved in the leasehold mis-selling scandal to bring a professional negligence claim against the conveyancing solicitor they instructed to help with the purchase of the property. If the solicitor failed to give you advice about the existence and implications of the onerous ground rent clause, we can assist you in suing for damages, which could be put towards purchasing your freehold from the freeholder.

If you are concerned about the ground rent provisions in your leasehold, please call Daniel or another member of our team in Derby, Leicester or Nottingham on 0800 024 1976 or contact us via our online enquiry form.