Insurer Aviva and housebuilder Persimmon have agreed to amend their leasehold terms after a UK competition watchdog investigation into potential mis-selling and unfairness in the property sector.
The Competition and Markets Authority said on Wednesday it had secured landmark commitments for leasehold homeowners as part of its crackdown on “potential breaches of consumer protection law in the leasehold housing market”.
CMA chief executive Andrea Coscelli said other housebuilders could “expect to face legal action” if they did not fix issues for leaseholders.
The watchdog launched its leasehold probe two years ago following the “leasehold prisoner” scandal, which revealed that thousands of homeowners were trapped in properties they could not sell due to escalating charges.
Leaseholders buy the right to occupy a property for a fixed period of time from a freeholder and pay regular fees such as ground rent. The government promised to abolish the sale of new leasehold homes altogether in 2017 due to rising controversy over the way in which developers were profiting from unfair fees, though it has yet to legislate.
Persimmon said on Wednesday it had agreed to offer leasehold homeowners the opportunity to buy their properties from the freeholder at a discounted price. The company stopped selling leasehold houses in 2017 and on Wednesday said it would cap the purchase price of a freehold at £2,000 in an extension of an existing scheme to subsidise the cost of converting from leasehold to freehold.
Aviva, which invested in freehold properties from developers via a fund run by its asset management subsidiary Aviva Investors, has agreed to remove clauses from its contracts which meant ground rents doubled every 10 to 15 years. The company has also agreed to repay homeowners affected by doubling ground rents, which can make it impossible to sell or remortgage homes.
About a fifth of English homes are leasehold, according to government figures, although developers such as Persimmon have stopped selling leasehold homes in the wake of the controversy. The CMA said in March that housebuilders Countryside and Taylor Wimpey had broken consumer law due to their own “unfair” leasehold terms and demanded they alter those contracts. It has also raised concerns that many leasehold property owners were mis-sold their homes as they did not understand the obligations they were signing up for.
In a statement, Aviva Investors said its ground rent fund would amend about 1,000 leases that came with doubling terms. representing just over 2 per cent of those held within the fund. The company will also return leaseholders’ ground rent costs to the original amount, in cases where it is the current freeholder.
Coscelli said: “This is a real win for thousands of leaseholders — for too long people have found themselves trapped in homes they can struggle to sell or been faced with unexpectedly high prices to buy their freehold.”
Persimmon chief executive Dean Finch said: “Persimmon has not historically sold leasehold houses in high volumes and introduced a right-to-buy scheme for leaseholders in 2017. However, we are committed to putting our customers first and have voluntarily agreed to extend this existing support to provide further certainty and reassurance.”