Thousands of leaseholders to be refunded for ‘unfair’ ground rents – how to find out if you’re owed cash
THOUSANDS of leaseholders are to be refunded for soaring ground rent charges following an investigation by the consumer watchdog.
Insurer Aviva will repay Brits for the extra money they spent on these charges - which have been doubled over the years.
Developer Persimmon Homes has also agreed to allowed leaseholders to buy the freehold of their property at a discount.
The shake-up comes following an investigation by the Competitions and Markets Authority (CMA) into the leasehold scandal concerning mis-selling of leasehold homes and high ground rents.
The watchdog is also probing into top developers Barratt, Taylor Wimpey , Countryside and Persimmon - Britain's second largest housebuilder.
Insurance firm Aviva was included in the investigation as it has invested in freeholds from developers over many years.
What to look out for if you want to buy a leasehold
ANDREW Johnson, money expert at the Money Advice Service, has some tips on what to consider before buying a leasehold.
- Check how many years are left on the lease. You may struggle to get a mortgage on a leasehold property which has less than 80 years to run. A short lease will be a lot more expensive to extend.
- Ask about the cost of extending your lease now if this might be an issue in the future. You don’t want anything that could impact your property's saleability in the future.
- Ask how much the ground rent is. This may be a relatively small amount now but beware escalating ground rents which have seen substantial figures payable at the end of the term of the lease. This could negatively impact your ability to sell your property in the future.
- Ask about service charges and other related costs. This generally covers repairs or maintenance to the property including building insurance. This can be several hundred or several thousands pounds, so consider how you will budget for these costs and the impact of any future increases.
Ground rent is a controversial charge paid by homeowners on a leasehold property. It is essentially rent paid to the freeholder for the land the property sits on.
They're common in flats ownership, as buyers don't own the building, but houses can also be sold under the scheme.
The charges are written into contracts but some developers have included clauses that will allow them to double the ground rent every 10 to 15 years.
Currently, there is no limit on the amount freeholders can charge in ground rent.
Leases also have to be renewed at the end of the term, usually every 100 years, often for huge sums.
Leaving homeowners trapped
Buyers are also unlikely to get a mortgage for properties with leaseholds that are close to needing to be renewed.
The extortionate costs have left thousands of homeowners trapped in properties they can't sell, footing the bill for ever increasing charges.
Persimmon Homes has also agreed to refund homeowners who have already bought the freehold a portion of what they paid.
This is following concerns the homeowners were led to believe they could buy their freehold at a certain price when buying the property, only to discover costs had increased by thousands of pounds with "no warning";.
Both Aviva and Persimmon have agreed to remove clauses from historic contracts.
It comes amid a raft of reforms aimed at tackling the sector. A ban on leasehold new-builds was first mooted in 2019 but rules weren't unveiled until last month's Queen's Speech.
But it will only apply to new homes built after the ban - existing leaseholders are still having to pick up the bill.
And in January, we reported how the Government is looking into new rules that will allowed homeowners to extend their lease by a maximum term of 990 years at zero ground rent.
Housing Secretary Robert Jenrick slammed the doubling of charges as "unfair".
He added: "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."
While CMA chief executive Andrea Coscelli said: "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.
"Now, they can breathe a sigh of relief knowing things are set to change for the better."
Other property companies have welcomed the shake-up.
Property consultant Ringley Group managing director and co-founder Mary-Anne Bowring said: "The outcomes secured by the Competition and Markets Authority is a victory for consumers and common sense.
"There was never a need to sell family houses as leasehold properties and the doubling of ground rents was an act of greed that has caused untold reputational damage to the property industry."
The CMA has not confirmed if other developers and insurers will have to repay customers for doubling ground rents too.
But the CMA said it expects others to "follow the lead of Aviva and Persimmon" or find they could "face legal action".
It said it had written to investment groups Brigante Properties, and Abacus Land and Adriatic Land to remove the double ground rent clauses from their contracts.
Getting your money back
It is understood that thousands of leaseholders are due a refund.
Any leaseholder in a building where Aviva is the current freeholder who has the double rent clause written into their contracts will be able to get money back.
While affected Persimmon Homes customers who bought their freehold from January 1 2000 at a higher price than what they were led to believe will be due a refund.
Both companies will be writing to affected leaseholders within 90 days.
This means you don't have to do much in the meantime - just keep an eye out for a letter through the post.
Aviva and Persimmon Homes will also be updating their websites, flagging to customers about the CMA shake-up - and what to expect if you think you're due money back.
The CMA hasn't confirmed details on what to do if you were a leaseholder paying the double ground rent charges, but have since moved house.
We've asked for more information and will update you as soon as we know more.
The Sun previously spoke to one family trapped in a home they can't sell as their ground rent doubles every 10 years up to a whopping £8,000.
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Here's what a leasehold is, what it means when buying a house and how it is different to a freehold.
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Research from NAEA Propertymark found that leaseholders pay an average of £277 per year in ground rent when they move in, rising to £319 for those who've been in their home a few years.
The Law Commission has already been pushing for changes to make it easier for leaseholders to by the freehold of their property from landlords.