Housebuilder scraps ground rent increases

Housebuilder scraps ground rent increases

UK developer Countryside Properties is to end ground rents which double every 10-15 years, as an investigation into the firm by the Competition Markets Authority (CMA) comes to a close.

Countryside said the decision to scrap the clause in its contracts, which was causing homeowners to pay over the odds in rent, was part of “voluntary undertakings” with the competitions watchdog.

Until 2017, Countryside was selling properties with doubling ground rent clauses. In September 2020, the CMA cracked down on the practice - calling it “unacceptable”, “misleading” and “taking advantage of homebuyers”.

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Countryside has already committed £10m in provisions for leaseholders out of pocket due to its doubling rent clause.

The developer will now add a further £5m, which will go directly into its Ground Rent Assistance Scheme - a scheme designed to reimburse its leaseholders.

For leases where Countryside is the freeholder, the developer said it is removing the doubling clause “unilaterally”. And for those where it is not, it is “seeking agreement with the owners of the freeholds to remove the doubling clause from each lease”.

Iain McPherson, the developer’s chief executive, said: "Countryside has engaged extensively and constructively with the CMA throughout the course of its review to reach this positive outcome for affected leaseholders."

His firm clarified in a statement published today (September 15) that it “was not the subject of mis-selling allegations in the CMA's investigation”.

This refers to the CMA’s statement in September, which found “troubling evidence of potentially unfair terms concerning ground rents in leasehold contracts and potential mis-selling”.

Whilst investigations have ended into Countryside, a number of other UK developers are still under active investigation. These include Taylor Wimpey, Brigante Properties, Abacus Land and Adriatic Land.

In June, the CMA reminded housing developers and investors they must review, and if necessary make changes to, their leaseholder terms or “expect to face legal action”.

The UK’s housing secretary, Robert Jenrick, echoed these sentiments, saying doubling ground rents had “no place in our housing market”.

That same month, the CMA secured “landmark” formal commitments from Aviva and Persimmon to change the terms in their leasehold contracts.

Aviva has removed terms which caused ground rents to double, and is repaying those homeowners who saw their rents double.

Whilst Persimmon will now allow leasehold house owners to buy the freehold of their home at a discounted price.