But which are the housing associations that bought rip-off doubling ground rent freeholds?
CMA turns its attention to the freehold owning outfits of Vincent Tchenguiz and Will Astor
Fifteen punters who bought freeholds with 10 or 15-year doubling ground rents from Countryside Properties plc must re-set annual charge to what it was when buyers first bought the lease, the Competition and Markets Authority announced today.
The move will benefit more than 3,400 leaseholders and the CMA chief executive Andrea Coscelli says more housing developers are “to be put under the microscope as the investigation continues”.
This is good news, as some house builders – notably Redrow (about which more on another occasion) – which sold leases with 10 or 15 year doubling ground rents have so far not been made to account for selling properties – often to first-timers supported with taxpayer loans – that are now difficult to sell or obtain a mortgage on.
Countryside Properties plc, then headed by Ian Sutcliffe, was a particularly egregious seller of doubling ground rent leases, selling flats with £300pa doubling ground rents at The Mount, Mill Hill, in North London, as late as May 2017.
Among its marketing slogans is: “We create places where people love to live, where they feel at home and come together as a community.”
The freeholders who have run up the white flag – sorry, have made formal commitments known as “undertakings” to the CMA – include investment firms (often private equity punters these days rather than pension funds) and housing associations.
The housing associations, many of which have charitable status, have not been named.
The CMA also says it will be investigating Vincent Tchenguiz’s Brigante Properties, part of the Consensus Business Group, and William Waldorf Astor’s Abacus Land and Adriatic Land freehold-owning companies that are part of the Long Harbour fund.
It is completely unknown who the ultimate beneficial owners are of these freeholds as they hide behind nominee directors and the companies are often based offshore.
Where these companies have bought doubling ground rents from Countryside Properties plc or Taylor Wimpey, the CMA will be looking for another “undertaking”.
The 15 freeholders who bought from Countryside Properties plc “will also remove terms which had originally been ground rent doubling clauses, but were converted so that ground rent increased in line with the Retail Prices Index (RPI).
“The CMA believes that the original doubling clauses were unfair terms and should therefore have been fully removed, not replaced with another term that increases the ground rent.”
This is good news indeed at a time when inflation is now escalating aggressively, meaning that RPI-based ground rents could end up more onerous than doubling ones. In addition, many freeholders who offered to vary doubling ground rent terms to those rising with RPI removed the doubling ground rent review periods, meaning that the ground rent increased throughout the lease period rather than merely doubling on, typically, five occasions every ten years.
The CMA said: “The move comes after the CMA launched enforcement action against 4 housing developers in September 2020. These were Countryside and Taylor Wimpey for using possibly unfair contract terms, and Barratt Developments and Persimmon Homes over the possible mis-selling of leasehold homes.
“After securing undertakings from Countryside to remove doubling ground rent terms from its contracts, the CMA turned its eye to businesses that bought Countryside freeholds and continued to use the same ground rent terms at the expense of leaseholders. The CMA wrote to these businesses, setting out its concerns and requiring them to remove these terms from their contracts.
“Due to the CMA’s intervention, thousands of leaseholders will now see their ground rents remain at the original amount – i.e. when the property was first sold – and they will not increase over time.”
Andrea Coscelli, Chief Executive of the CMA, said:
“Thousands more leaseholders can now rest easy knowing they will not be forced to pay costly doubling ground rents. We believe these terms are unjust and unwarranted, and can result in people trapped in homes they are unable to sell or mortgage – a major cause of anxiety and stress for so many.
“We welcome the commitment from these businesses to do what is right by their leaseholders by removing these terms, and we will hold them to it.
“While this is a huge step forward, our work here isn’t done. We will continue to work hard to free leaseholders from these problematic terms and will now be putting other housing developers under the microscope.”
Secretary of State for Levelling Up Michael Gove said:
“We are restoring fairness in the leasehold system and that’s why we asked the CMA to investigate unjust practices, such as doubling ground rent.
“I welcome their ongoing success in eradicating this unacceptable treatment of leaseholders from the housing market and freeing thousands from such inflated costs. Others must now follow suit, as our work to help all leaseholders continues.
“Homebuyers starting a new lease from this summer will now pay nothing in ground rent costs – setting the path to a more equal future for homeownership.”
Full CMA statement is here:
Fifteen businesses to remove costly ground rent terms Over 3,400 leaseholders’ ground rents will now remain at the amount charged when their home was first sold CMA Chief Executive says more housing developers to be put ‘under the microscope’ as investigation continues Fifteen businesses which had bought freeholds from housing developer Countryside have now given formal commitments – known as undertakings – to the Competition and Markets Authority (CMA) to remove terms that cause ground rents to double in price.