(LONDON) CMA REPORT: Two big players in the leasehold sector have agreed to change the way they operate, following an investigation by the competition watchdog #AceNewsDesk report

#AceNewsReport – June.24: The Competition and Markets Authority (CMA) launched its investigation into leaseholds in 2019 because it was worried that leaseholders were facing huge and unexpected increases in the cost of buying a freehold or massive increases in ground rents:

LONDON: Leasehold firms agree changes after watchdog investigation: House-builder Persimmon will allow its leaseholders to buy the freehold of their property at a discount: Insurance company Aviva, which buys leaseholds from house builders, will repay homeowners who saw their ground rents double.

Houses
Leasehold Report:

Campaigners for leaseholders said the commitments were a “massive milestone”.

It said the said the commitments by Persimmon and Aviva were a “real win”.

CMA chief executive Andrea Coscelli said the watchdog now expected other housing developers and investors to take similar action. 

“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. 

“But our work isn’t done. We now expect other housing developers and investors to follow the lead of Aviva and Persimmon. If not, they can expect to face legal action.”

What is a leasehold?

With a leasehold, the person owns a lease which gives them the right to use the property. But they still have to get their landlord’s permission for any work or changes to their homes.

When a leasehold flat or house is first sold, a lease is granted for a fixed period of time, typically between 99 and 125 years, but sometimes up to 999 years – although people may extend their lease or buy the freehold.

But leasehold house owners are often charged expensive ground rent as well as fees if they want to make changes to their homes. A leasehold house can also be difficult to sell.

Under the new commitments Aviva will remove ground rent terms the CMA considers unfair and repay homeowners who saw rents doubled.

The CMA’s George Lusty told the BBC: “If Aviva is now the freeholder for your property and your lease contains a term that doubles the ground rent every ten or 15 years, that doubling won’t apply, so you’ll just pay the initial ground rent that you signed up to at the beginning and if you’ve already started to pay an increased fee, they’ll refund that.”

Fair deal

Persimmon Homes has extended its existing Right to Buy scheme to cap the purchase price of a freehold at £2,000. It said the extended scheme applied to any leases sold on or after 1 January 2000 and would run until 31 December 2026.

It said customers who had already acquired their freeholds from Persimmon under the existing Right to Buy scheme, and who still own the freehold, could apply to be reimbursed for the difference between the price paid and £2,000.

Persimmon group chief executive Dean Finch said the agreement showed the company’s “determination to operate with integrity”. 

“Building on our existing Right to Buy scheme, this agreement provides a fair deal for all leaseholders of Persimmon built houses, extending the opportunity to purchase their freehold at a price well below market value.” 

The National Leasehold Campaign, many of many of whose members gave evidence to the CMA, tweeted that the watchdog had secured “landmark commitments for leaseholders. Another massive milestone. Persimmon & Aviva have eventually done the right thing at last, now other developers & freeholders MUST FOLLOW.” 

The CMA launched enforcement action against four housing developers in September 2020. It has also been investigating several investment firms that bought a large number of freeholds from two of these developers and continued to use the same ground rent terms.

The rest of the investigation is continuing against housebuilders Countryside Properties, Taylor Wimpey and Barrett.

Mr Lusty said: “We hope today’s announcement will send a clear signal to other housing developers and investors that they need to sort out this really difficult issue for leasehold home owners.

“These other investigations… are continuing and we’ll hope to be able to say more about those in the coming months.”

#AceNewsDesk report ………Published: Jun.24: 2021:

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#cma, #ground-rents, #leasehold, #london