Taylor Wimpey scraps ground rent clauses as Gove warns ‘we’re coming after you’

Taylor Wimpey has become the third housebuilder to scrap contracts allowing ground rents to double every decade. The agreement is part of an ongoing investigation by the Competition and Markets Authority, launched in September 2020, into unfair contract terms in leasehold agreements. Countryside and Taylor Wimpey were investigated for using “possibly unfair contract terms”, while Barratt Developments and Persimmon Homes for the “possible mis-selling of leasehold homes”. Taylor Wimpey has now voluntarily given formal commitments to the CMA to remove terms from leasehold contracts that cause ground rents to double in price every 10 years. It will also remove terms which had originally been ground rent doubling clauses but were converted so the ground rent increased in line with the Retail Prices Index. The CMA said the original doubling clauses were unfair terms and should therefore have been fully removed, not replaced with another term that increases the ground rent. Affected Taylor Wimpey leaseholders will now see their ground rents remain at the original amount and they will not increase over time. Taylor Wimpey has also confirmed to the CMA that it has stopped selling leasehold properties with doubling ground rent clauses. Chief executive Pete Redfern said: “Taylor Wimpey has always sought to do the right thing by its customers, shareholders and other stakeholders, and we are pleased that today’s voluntary undertakings will draw this issue to a full close, within our original financial provision.” Andrea Coscelli, chief executive of the CMA, added: “This is a huge step forward for leaseholders with Taylor Wimpey, who will no longer be subject to doubling ground rents. These are totally unwarranted obligations that lead to people being trapped in their homes, struggling to sell or obtain a mortgage. “Other developers and freehold investors should now do the right thing for homeowners and remove these problematic clauses from their contracts. If they refuse, we stand ready to step in and take further action – through the courts if necessary.” Alongside the removal of the clauses, Taylor Wimpey is also making a financial offer to third-party freeholders of leases that Taylor Wimpey no longer owns to enable their leaseholders to also revert to fixed ground rents. Of the four housebuilders investigated by the CMA, three have agreed deals – Taylor Wimpey, Persimmon and Countryside. Aviva, which owns a number of ground rents, has also agreed terms with the CMA. Only the investigation into Barratt Developments remains ongoing. Secretary of State for Levelling Up Michael Gove warned that any developer using the practice would be sought out. “Unfair practices, such as doubling ground rents, have no place in our housing market – which is why we asked the CMA to investigate and I welcome its success in holding these major industry players to account,” he said. “This settlement will help to free thousands more leaseholders from unreasonable ground rent increases, and other developers with similar arrangements in place should beware: we are coming after you.” Gove added: “We continue our work to protect and support all leaseholders and our legislation to restrict ground rents in new leases to zero will put a stop to such unfair charges for future homeowners once and for all.” As part of its review of the leasehold sector, the CMA is continuing to investigate two investment groups, Brigante Properties and Abacus Land and Adriatic Land, after it wrote to the firms earlier this year setting out its concerns and requiring them to remove doubling ground rent terms from their contracts.   To send feedback, e-mail samantha.mcclary@eg.co.uk or tweet @samanthamcclary or @EGPropertyNews Image © REX/Shutterstock