Ground Rents – What does Countryside Properties’ withdrawal of fees mean for leaseholders in the UK?

Countryside Properties has become the latest housebuilder to announce its intention to scrap the “unfair” contract terms that saw the ground rents of its leaseholders double every 10 to 15 years.

The move comes following increasing pressure from the Competition and Markets Authority (CMA) who launched enforcement action against four major housing developers, including Countryside, back in September 2020.

Investigations by the CMA had found that with ground rents typically starting at approximately £250 a year, the ‘doubling’ clause resulted in rents escalating to the extent that homes became almost impossible to sell or mortgage.

The news of Countryside’s reverse in policy will no doubt be universally welcomed amongst the UK’s approximate four million leaseholders, as it signals a huge turn in the tide as the battle against the practice intensifies. But there is still a long way to go, and ground rent only forms part of the issue.

Leaseholders do not own any part of their home. Not a single brick. And as such, they need to obtain the express permission of the freehold’s owner to undertake any desired cosmetic or structural changes and even then, will almost certainly be charged an additional fee for the privilege.

Developers also retain the right to sell on the home’s freehold to investors at any point without even consulting with the leaseholder, which is controversial, to say the least. But reforms to the laws which allow this kind of practice have been frustratingly slow for leasehold campaigners, many of whom feel they have been duped into buying unsellable homes.

Said campaigners have long been vocal about their want for leaseholds to be outlawed on new builds, and the Government has expressed its support for the matter, with former Housing Secretary Robert Jenrick previously stating that both the unfair treatment of leaseholders and crippling ground rent clauses, have “no place in our housing market”, adding: “This behaviour must end and I look forward to appropriate redress being forthcoming for leaseholders.”

What next for leaseholders?

The Government has gone on to outline plans to ban unscrupulous ground rents from all leasehold contracts in the future. But for now, those who have existing leaseholds with developers or investors who are yet to amend their policies concerning ground rents, are still stuck in a hopeless position. Unless, that is, the watchdog commits to forcing those other builders or investment firms to follow suit.

It is still not a level playing field for leaseholders in spite of the news about Countryside. The business said in its statement that it would no longer sell leasehold homes with doubling ground rents, and would remove terms which meant ground rent increased in line with the Retail Prices Index (RPI). But as yet, it has not mentioned any form of compensation.

When Persimmon Homes reversed its policy on ground rents back in June, it promised that it would offer leaseholders the opportunity to buy the freehold of their property at a discount. But they too stopped short of any financial reimbursement. In fact, it’s only Aviva, which buys freeholds from housing developers, that has thus far vowed to repay homeowners who had fallen foul of doubling ground rents.

And with this, the fight goes on. But with fortune very much shifting in favour of the leaseholders, we might expect to see further pledges of compensation made, and other housebuilders falling into line by withdrawing ground rents altogether, otherwise, the doors will very much be left open for legal action to be taken.

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