Freehold and Leasehold

Ministry of Housing, Communities and Local Government written question – answered on 26th July 2021.

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Photo of Fleur Anderson Fleur Anderson Shadow Minister (Cabinet Office)

To ask the Secretary of State for Housing, Communities and Local Government, what steps he is taking to (a) monitor and (b) ensure that the public pledge of 27 June 2019 made by freeholders for leaseholders is being upheld.

Photo of Eddie Hughes Eddie Hughes Parliamentary Under-Secretary (Housing, Communities and Local Government)

We understand the difficulties and frustrations for existing leaseholders who are unhappy with the ground rent they are required to pay and feel their leases should be changed.

The Public Pledge for Leaseholders is a voluntary code signed by over 60 freeholders, developers, investors and property agents. The signatories to the pledge who are freeholders committed to contacting existing leaseholders with ground rents that doubled more frequently than every 20 years, to offer to amend to increases based on RPI.

The Government asked the Competition and Markets Authority (CMA) to investigate potential mis-selling of homes and unfair terms in the leasehold sector. We are pleased that the CMA is taking enforcement action in relation to two key issues. First, to tackle certain instances of mis-selling of leasehold property. Second, to address the problems faced by homeowners from high and increasing ground rents. On 23 June the CMA announced commitments secured from Aviva and Persimmon to amend their practices regarding doubling ground rents and houses sold as leasehold.

Aviva have committed to remove ground rent terms that the CMA considers unfair and repay homeowners who saw ground rents doubled. It will also remove terms that were originally doubling clauses that have been converted to RPI-based ground rent terms.

The CMA also recommended improvements to the quality of information available to consumers early in the buying process. Specifically, Persimmon has agreed to extend the timeframe that prospective buyers are given to exchange contracts after reserving a property, and to provide people with more upfront information about the annual costs of buying a home. This addresses concerns that the reservation period – i.e. the period of time during which a potential buyer must take a number of steps to progress the purchase – is too short and can pressure the buyer into making a decision.

These commitments are a hugely important step and demonstrate our determination to support affected leaseholders. We urge other developers to follow suit.

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