Leasehold scandal: thousands of homeowners to receive ground rent refunds

Leasehold scandal: thousands of homeowners to receive ground rent refunds, as regulator secures agreements for Taylor Wimpey leaseholders.

More than 5,000 leaseholders could be set to receive ground rent refunds, after action from the Competition and Markets Authority (CMA).

The regulator has secured agreements with nine freehold investment companies to remove ground rent doubling clauses from leases.

Here, we explain who may be eligible for a refund and outline the steps the government is taking to reform leasehold.

Leaseholders set to receive ground rent refunds

Thousands of leaseholders saddled with ground rent doubling clauses will be eligible for refunds, after an investigation by the CMA.

Many homeowners who bought their properties from Taylor Wimpey will see their annual ground rent reduced to the original amount they paid when they first bought the home.

Ground rent doubling clauses will be removed, as will clauses that make ground rents increase depending on what happens to the Retail Prices Index (RPI).

The problem with ground rent doubling clauses

Thousands of leaseholders unknowingly bought houses from developers that contained clauses making their ground rent double every 10 years.

This meant an annual ground rent of £100 would rise to £1,600 in 40 years’ time. These clauses rendered many properties unsellable, with lenders refusing to offer mortgages on them.

The situation has been complicated by developers selling off their freeholds in bulk to investment companies, some of which had shown little interest in removing lucrative doubling clauses.

The CMA says it has now secured an agreement with nine businesses that bought freeholds form Taylor Wimpey. These companies will remove doubling clauses and refund leaseholders who have been left out of pocket.

While this is good news for many, it doesn’t cover all Taylor Wimpey leaseholders. The regulator says it is continuing to engage with five other investment companies, which have not yet agreed to make changes.

What if I bought my home from a different developer?

There are some encouraging signs for leaseholders who bought from different developers.

The CMA says Crest Nicholson, Redrow, Miller and Vistry (which owns Galliford Try, Linden and Bovis Homes) are all co-operating with its investigation by working with freehold companies to remove punitive clauses.

The regulator has also concluded discussions with companies that bought leases from Countryside, after they gave ‘similar commitments’ to make changes for affected leaseholders.

An investigation into Barratt Homes for potential mis-selling has now been concluded, after the CMA found insufficient evidence.

How the government is seeking to overhaul leasehold

The government has been working on overhauling the leasehold system since 2017.

So far, it has banned new-build houses from being sold as leasehold and has abolished ground rents on new residential leases. Next, it plans to introduce a new right for leaseholders to extend leases by 990 years at zero ground rent.

Further proposals include the introduction of a calculator, which will provide a set formula for how much lease extensions should cost.

Finally, the government is consulting on the possibility of replacing leasehold with a commonhold system for flats. Commonhold involves all leaseholders in a block owning a share of the building’s freehold and managing its maintenance themselves.

Leasehold scandal: a timeline

The CMA says it has helped around 20,000 leaseholders so far, and this latest announcement is another step towards issues with leasehold houses and ground rents finally being addressed.

This saga has been running for many years. Back in June 2018, Which? published an investigation into the leasehold scandal, speaking to nearly 200 leasehold homeowners who faced spiralling costs.