Taylor Wimpey has removed toxic ground rent clauses from leaseholders that purchased a Taylor Wimpey property.
Housing developer removed clauses from purchasers’ leasehold contract that would have seen their ground rents double in 10 years.
It is the latest developer to take this step following an investigation into ground rents by the Competition Markets Authority, creating fresh hope for those remaining leaseholders suffering from the problem that can prevent them selling their homes.
This comes as lenders have said they will no longer lend against such clauses. It creates huge problems for homeowners.
Toxic ground clauses homeowners have made it difficult for them to sell their homes
These lenders have made it clear that homeowners affected by the decision will not be able to sell their homes unless there is a buyer for cash.
Others have had to stop remortgaging.
The affected homeowners are left with virtually worthless assets. They often have to spend thousands to get the clauses removed – through either a deed or variation, or buy the freehold which would permit them to extend their lease.
Taylor Wimpey has voluntary agreed to eliminate these harmful ground rent clauses, meaning that property owners affected by them no longer have these difficulties.
Developers are also getting rid of doubling ground rental clauses, which were changed so that ground rent rose in line with inflation (the Retail Prices Index).
CMA thinks that the original clauses of doubling were unjust and that they should be removed.
If they are not satisfied with the increase, leaseholders can’t refuse to pay ground rent. Leaseholders may also be subject to legal action if they default on payments.
Many homeowners affected by the clauses are left without any assets, and they have to spend thousands to take them out.
After the CMA initiated enforcement actions against four housing developers, Taylor Wimpey’s move follows September 2020.
Countryside and Taylor Wimpey were cited for possibly unjust contract terms. Barratt Developments was also criticized, as well as Persimmon Homes and Persimmon Homes, over possible mis-selling leasehold properties.
CMA already assisted thousands of leaseholders in securing agreements from Countryside and Persimmon as well as Aviva as an investor for freeholds.
In our housing market, unfair practices like doubling the ground rents are not allowed
Secretary of State for Levelling Up Michael Gove
The CMA has taken action so that affected Taylor Wimpey tenants will see their ground rents stay at the same amount as when they were first sold. They will also not rise over time.
Taylor Wimpey also stated to the CMA it had stopped selling leasehold property with ground rent clauses doubling.
Andrea Coscelli from the CMA said that this was a significant step forward in favor of Taylor Wimpey’s leaseholders. Ground rents will not be doubled.
These are completely unwarranted obligations which lead to homeowners being stuck in their houses, unable to sell the house or get a mortgage. It is my hope that the good news that they won’t be bound by these terms will give them some happiness as we enter Christmas.
“Other developers, freehold investors must now take the right step for homeowners by removing these clauses from their contracts. If they decline, we are prepared to take additional action through the courts.
“Of the four developers that the CMA filed a case against in September 2020, three of them have settled with the CMA.” Barratt Developments’ investigation is ongoing.
‘This is the type of issue that could quickly be resolved and subject to fines, if CMA gets the consumer powers that are currently being considered by the Government.
Michael Gove, Secretary of State for Levelling Up, stated that “unfair practices such as double ground rents have no place on our housing market. That is why we requested the CMA investigate and I am happy to see their success in holding major industry actors accountable.
“This settlement will allow thousands more leaseholders to be free from unreasonable ground rent rises and developers who have similar arrangements should beware. We are going after you.
“We are continuing our efforts to protect leaseholders, and our legislation to limit ground rents in new leasing to zero will end such unfair charges for future homeowners.
After writing to two investors groups earlier this year, CMA began to look into them. Abacus Land and Adriatic Land are the latest targets.
Barratt Developments remains under investigation by the CMA.
