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Victory for leaseholders after landmark investigation

Written by: Liz Bury
Developers back down on leasehold terms after action from the Competition and Markets Authority
Victory for leaseholders after landmark investigation

Developers Aviva and Persimmon have agreed to amend their leasehold terms after a Competition and Markets Authority (CMA) investigation into unfair practices.

The move will potentially release some leaseholders whose contracts have trapped them with costly bills for ground rent and left them unable to sell.

Aviva has committed to removing terms on ground rents considered unfair by the CMA, and to repaying tenants whose ground rents doubled.

In some Aviva contracts, the ground rents doubled every 10 to 15 years and were making it difficult for tenants to sell or remortgage homes. The ground rents will revert to the amount they were when the property was first sold and will not increase.

Further, Aviva will refund the excess money that tenants have already paid under the old terms.

Persimmon will offer leaseholders the opportunity to buy the freehold of their property at a discounted price. It will also repay certain leaseholders who already purchased their freehold.

Persimmon will also extend the timeframe given to prospective buyers to exchange contracts after reserving a property.

“This is a real win for thousands of leaseholders who have found themselves trapped in homes they can struggle to sell, or been faced with unexpectedly high prices to buy their freehold. They can breathe a sigh of relief,” said Andrea Coscelli, chief executive at CMA.

“Aviva and Persimmon have responded positively to this investigation. We now expect other housing developers and investors to follow their lead. If not, they can expect to face legal action,” Coscelli said.

Mark Hayward, chief policy adviser at Propertymark, added: “The CMA’s action will help those whose freeholds are with Aviva and Persimmon. Other house developers and investors must now commit to make similar undertakings to ensure all leasehold house owners can move forward with their lives.”

The CMA began enforcement action against Barratt Developments, Countryside Properties, Persimmon Homes and Taylor Wimpey in September 2020.

The action related to perceived mis-selling and unfair contract terms on ground rent.

The CMA has written also to investors Brigante Properties, and Abacus Land and Adriatic Land, requiring them to remove doubling ground rent terms.

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