Britain’s competition watchdog tells homebuilders to drop unfair ground rents

Taylor Wimpey and Countryside Properties must remove leasehold terms from buyers’ contracts

A Taylor Wimpey building site in St Albans, Britain. The homebuilder has come under fire over contracts that penalise buyers. Reuters

Britain’s competition watchdog ordered two of the country’s biggest homebuilders to remove “unacceptable” ground rent terms from their contracts on Friday after property owners were left out of pocket.

The Competition and Markets Authority said it had written to Taylor Wimpey and Countryside Properties over concerns its use of terms that double ground rent every 10 or 15 years is a breach of consumer protection law.

The watchdog demanded the terms were removed from existing contracts and must not be included in future.

“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,” Andrea Coscelli, chief executive officer of the CMA said.

The decision came after the CMA started enforcement action against four residential housing developers in September 2020 for using the unfair contract terms and over “the possible mis-selling of leasehold homes”.

The government is looking to crack down on unfair selling practices after some home owners complained they didn’t understand their property did not include the land upon which it stands.

Companies then charged hefty ground rents to buyers, who realised the fee doubled every decade making the property unsaleable in some instances.

The CMA said the terms can also affect buyers’ property rights and that if the housebuilders did not address the concerns, further action would be taken “including through the courts”.

UK Housing Secretary Robert Jenrick said on Friday that the government asked the CMA to investigate the issue and he strongly welcomed their efforts to “bring justice to homeowners affected by unfair practices”.

“This behaviour must end,” he said. “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.”

The two homebuilders can respond to the watchdog's concerns and avoid court action by signing formal commitments – known as undertakings – to remove the ground rent terms from their leasehold contracts.

The CMA said it would continue investigating two construction companies, Barratt and Persimmon, over similar concerns.

Taylor Wimpey said it would continue to co-operate with the CMA “to find a satisfactory resolution within the required timescale”.