Taylor Wimpey PLC and Countryside Properties PLC told to change ground rent

PLC () and PLC () have been ordered to remove ‘unfair’ contract terms from leasehold agreements by the Competition and Markets Authority.

Last October, the CMA started enforcement action against four builders over leasehold arrangements on their houses.

and Countryside were cited for ground rent contract terms while PLC () and Homes PLC () faced action over the possible mis-selling of leasehold homes.

In a statement today, the CMA said it has now written to and Countryside outlining specific concerns about contracts that can see the cost of ground rents doubling every ten to fifteen years.

The CMA said the contracts break consumer protection law, affect property rights and can mean owners struggling to sell or mortgage properties.

All terms that the CMA considers to be unfair have to be removed by the two companies and cannot be used again, said the letter.

To avoid court action, the competition authority added the two companies have to sign formal undertakings to cease and remove these terms from contracts.

Investment firms that have bought blocks of the leases from the two developers are also under investigation said the CMA, while the probe into Barratt and remains ongoing.

Andrea Coscelli, CMA Chief Executive, said: “These ground rent terms can make it impossible for people to sell or get a mortgage on their homes, meaning they find themselves trapped.

“This is unacceptable. Countryside and must entirely remove all these terms from existing contracts to make sure that they are on the right side of the law.

“If these developers do not address our concerns, we will take further action, including through the courts, if necessary.”

Taylor Wimpey responded that it would continue to cooperate with the CMA and work to find a satisfactory resolution. The builder has said it stopped selling leases containing 110-year doubling clauses in 2012 and set aside £130mln in 2017 to help customers switch into less expensive contracts.

Countryside said it has sold no properties with doubling ground rent clauses since 2017 and introduced Ground Rent Assistance Scheme in 2020 to assist leaseholders whose ground rents doubled more frequently than every 20 years. 

Shares in FTSE 250 constituent Countryside dropped 1% to 518.5p while FTSE 100 member Taylor Wimpey fell 1% to 183p.