Thousands of people who bought leasehold homes from the housing developer Countryside Properties will be freed from costly contract terms, following an investigation by the Competition and Markets Authority.
The watchdog has been looking into the practice by Countryside and other property developers of doubling ground rent every 10 to 15 years.
These increases, which are written into property contracts, leave some house owners struggling to sell or mortgage their homes while their rights to their property can also be at risk if they fall behind on ground rent payments.
Countryside Properties has now voluntarily given formal commitments to the CMA to remove terms from its leasehold contracts that cause ground rents to double.
The company will also remove terms from updated contracts that meant the ground rent increased in line with the higher retail prices index measure of inflation. Affected leaseholders’ ground rent will now remain at the amount charged when they bought their home and will not increase over time.
Countryside confirmed it no longer sold leasehold properties with doubling ground rent clauses.
The announcement comes a year after the CMA launched enforcement action against four housing developers – Countryside, Taylor Wimpey, Barratt Developments and Persimmon Homes – which it believed might have broken consumer protection law in relation to leasehold homes.
The insurance group Aviva, which bought freeholds from developers, agreed in June to remove ground rent terms that were considered unfair and repay homeowners whose rents doubled after the CMA’s investigation.
The housebuilder Persimmon also agreed at the time to offer leasehold homeowners the opportunity to buy the freehold of their property at a discounted price, and to make repayments to some homeowners who bought their freeholds.
The CMA wrote to Countryside and Taylor Wimpey in March, asking them to remove the ground rent terms from their contracts.
Andrea Coscelli, the CMA’s chief executive, said: “Leaseholders with Countryside can now breathe a sigh of relief knowing they will no longer be forced to pay these doubling ground rents. No one should feel like a prisoner in their home, trapped by terms that mean they can struggle to sell or mortgage their property.”
Coscelli called on Taylor Wimpey and other developers to “do the right thing by their leaseholders and remove these problematic clauses from their contracts”.
He added: “If they refuse, we stand ready to step in and take further action – through the courts if necessary.”
Countryside said it had not sold any properties with doubling ground rent clauses since 2017. It added that it expected to put aside a further £5m to cover the ground rent assistance scheme, taking its total provision for the scheme to £15m.
Iain McPherson, Countryside’s chief executive, said: “Countryside has engaged extensively and constructively with the CMA throughout the course of its review to reach this positive outcome for affected leaseholders.”