Legal warning that sales market still hurt by ground rent problem

House and apartment sales are still being hit by confusion and worry over ground rents on existing second-hand leasehold properties.

This is despite breakthroughs with some developers who have at last agreed to outlaw grounds rents on most new-build properties. 

Yesterday we reported that Taylor Wimpey will remove from leasehold contracts certain clauses which caused the ground rents payable by leaseholders to double in price every 10 years. 

It will also address lease terms which were originally doubling clauses but were converted into RPI-based ground rent terms.

However, there comes a legal warning today that while this announcement and similar ones earlier in the year from Persimmon, Aviva and Countryside are welcome, the broader issue of the flawed system of ground rents still needs to be properly addressed.

“We are being contacted by an increasing number of leaseholders seeking advice about unfair ground rents, which are not only onerous but also make it difficult for them to sell their properties” explains Jonathan Frankel, a leasehold enfranchisement specialist and partner at Cavendish Legal Group.

He continues: “The Leasehold (Ground Rent) Reform Bill that is presently going through Parliament will ensure that new leases granted will not have the problem of rising ground rents. 

“Unfortunately, it will not tackle the issue of rising ground rents on existing leaseholds, leaving homeowners with such leases in a state of limbo unless they take action themselves by seeking a legal solution.”

In 2020 the Competition and Markets Authority enforcement action against four housing developers - the three who have now responded and Barratt Developments, where the CMA probe is continuing.

Frankel adds: “It is good to see another housebuilder taking action after the unfairness of the current system was highlighted by the Competition and Markets Authority, and the National Leasehold Campaign.

“Hopefully in 2022 we will see more housebuilders following suit and announcing that leaseholders who had purchased properties from them will no longer be subject to ground rents that double every 10 years.”