Doubling Ground Rent: New Deal To Help Leaseholders Buy The Freehold24th Jun 2021

by Nick Leedham on 24th Jun 2021

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New Hope For Leasehold House Buyers Hit By Doubling Ground Rent Scandal

Housebuilder Persimmon Homes and insurance giant Aviva have finally offered a deal to house buyers having to pay doubling ground rents under onerous leasehold terms.

After years of pressure, they have agreed a deal with the Competition and Markets Authority (CMA). These undertakings have been provided to the CMA voluntarily and without any admission of wrongdoing or liability.

Persimmon’s proposals would allow leasehold owners to buy the freehold for a discounted price. Campaigners have hailed this a “massive milestone” after all the expense and stress endured by worried leaseholders.

But it took years of campaigning and media coverage to get from millstone to milestone. And buying the freehold remains a complex area of the law that requires specialist legal advice.

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What Persimmon Homes Has Agreed 

Persimmon proposes to allow leaseholders to buy the freehold of their property at a discount. It has extended its Right to Buy scheme to cap the price of a freehold at £2,000. This applies to any leases sold on or after 1 January 2000; it will run until 31 December 2026.

But what if you’ve already bought the freehold under the existing Right to Buy scheme? You can apply to get some money back. It would be what you paid minus £2,000.

Persimmon Homes has also agreed extend the time purchasers have to exchange contracts after reserving a property and to provide more information upfront about the annual costs of owning a home. This will help buyers to make better-informed and less hasty decisions.

What Aviva Has Agreed

Aviva (which buys leaseholds from house builders) will repay homeowners who saw their ground rents double. It has agreed to refund the excess ground rent that affected leaseholders paid over the years.

The insurance giant will remove the doubling ground rent clauses from its leasehold contracts. 

It will also remove terms that originally doubled ground rents but were then converted into rent increases based on Retail Price Index (RPI) inflation.

Where Aviva is the current freeholder, the leaseholders’ ground rents will revert to the original amount and never increase.

What If I Bought Leasehold Property From Another Housebuilder?

The CMA is continuing to investigate the following:

  • housing developers – Countryside Properties, Taylor Wimpey and Barratt Homes
  • investment groups – Abacus Land and Adriatic Land (in particular Abacus Land 1 (Holdco) Limited, Abacus Land 4 Limited, Adriatic Land 1 (GR3) Limited), and Brigante Properties; these firms bought leasehold contracts from Countryside and/or Taylor Wimpey.  

The consumer protection legislation relevant to the CMA’s concerns about ground rent terms are:

  • the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs), for contracts entered into before 1 October 2015
  • Part 2 of the Consumer Rights Act 2015 (CRA), for contracts entered into on or after 1 October 2015. 

Both pieces of legislation aim to protect consumers against unfair contract terms. They require contract terms to be fair and transparent.

Useful Further Reading

  • What is freehold property? – read more…
  • What’s the difference between freehold and leasehold property? – read more…
  • Why you should consider buying the freehold before the lease drops below 80 years – read more…
  • Why you must be secretive when buying a share of the freehold – read more…
  • How to deal with doubling ground rent – read more…
  • Stop Taylor Wimpey’s ground rent from doubling – read more…

Get Expert Legal Advice

Buying the freehold of your home – whether a new-build house or an existing flat – is an important step that confers many financial and practical benefits.

But there are potential pitfalls for the unwary. You will also need to consider all the legal responsibilities that go with owning or co-owning the land under your property.

Freehold purchases involving some properties in London and the Bournemouth area may be more complicated legally because they are more likely to have a head lease (which adds an extra layer of ownership and paperwork).

So it pays to get expert legal advice from a solicitor who specialises in residential leasehold property law. Coles Miller’s Residential Leasehold Department is based at our West Cliff, Bournemouth office.

Contact leasehold Associate Solicitor Nick Leedham for more information.

Importantly, you will also need specialist advice from a chartered surveyor with regard to the value of your property and how much you are prepared to pay for the freehold. Coles Miller can advise on legal matters but not on property values.  

This document is not intended to constitute and should not be used as a substitute for legal advice on any specific matter. No liability for the accuracy of the content of this document, or the consequences of relying on it, is assumed by the author. If you seek further information, please contact Managing Partner Neil Andrews at Coles Miller Solicitors LLP.