Newsflash: Ground Rent Refunds

It has today been announced that The Competition and Markets Authority have agreed a deal with house builders regarding leaseholder ground rent increases.

Aviva has committed to remove certain terms from its leasehold contracts which cause ground rents to double, and Persimmon will now offer leasehold house owners the opportunity to buy the freehold of their home at a discounted price.

The commitments signed by Aviva and Persimmon mean they have now agreed to the following:

Aviva will remove from leasehold contracts certain clauses which were doubling the ground rents payable by leaseholders. It will also remove terms which were originally doubling clauses and have been converted into RPI-based ground rent terms.

Doubling clauses that cause ground rents to double every 10 to 15 years mean people can often struggle to sell or mortgage their homes. They can also affect leaseholders' property rights. Where Aviva is the current freeholder, those leaseholders' ground rents will revert to the original amount - i.e. when the property was first sold - and this will not increase over time.    

Aviva has also agreed to repay homeowners who were affected by these doubling ground rent clauses. This means that, where ground rents had increased, people will be refunded the excess money they had paid over this time.

Persimmon will offer leasehold house owners the option to buy the freehold of their property at a discount, better reflecting what they expected when they originally bought their house.

It will also make repayments to certain homeowners who have already purchased their freeholds.

This addresses concerns raised by consumers with the CMA and local Trading Standards, that they were led to believe they could buy their freehold at a certain price, only to find out later that this price had increased by thousands of pounds with no warning.

It also means those individuals who have already bought their freehold will receive a refund, meaning they don't miss out.

Persimmon has also 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.

Housing Secretary Robert Jenrick adds: "The Government asked the CMA to conduct this investigation – and I welcome their efforts to bring justice to homeowners affected by unfair practices, such as doubling ground rents, which have no place in our housing market.

"This settlement with Aviva and Persimmon is a hugely important step and demonstrates our commitment to support existing leaseholders who may have been mis-sold properties.

"We have also introduced new legislation that will protect future homeowners by restricting ground rents in new leases to zero and I would strongly urge other developers to follow suit in amending their historic practices."