The Competition and Markets Authority has ordered two housing developers to remove certain contract terms requiring leaseholders to pay ground rents that double every 10 or 15 years.
The competition watchdog has written to Countryside and Taylor Wimpey outlining its concerns that their use of terms, which double the ground rent every 10 or 15 years, breaks consumer protection law.
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.”
According to the CMA, the companies must also agree not to use the terms again in any future leasehold contracts.
It comes after the competition watchdog launched enforcement action against four housing developers in September, including Countryside Properties and Taylor Wimpey for using possibly unfair contract terms.
Housing secretary Robert Jenrick said: “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.”
In January the housing secretary announced that millions of leaseholders will be given the right to extend their lease by a maximum term of 990 years at zero ground rent.
Last year the CMA also launched enforcement action against Barratt Developments and Persimmon Homes over the possible misselling of leasehold homes. The watchdog said its investigation into the two developers was ongoing.
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