Housebuilders Countryside and Taylor Wimpey could be breaking the law if they continue to include deeply unfair ground rent terms in contracts for new homes, according to the competition watchdog.
The Competition and Markets Authority (CMA) says it has written to the firms outlining specific concerns over their use of terms that double ground rent every 10 to 15 years.
Campaigners have called for leaseholds to be banned on new builds, and the Government has said previously it would work to end the practice, which has been described as the housebuilders’ equivalent of the PPI mis-selling scandal.
Investigations into Barratt Developments and Persimmon Homes remain ongoing, the watchdog added.
The CMA said that as a result of the increases in ground rent, terms built into contracts, it means people can struggle to sell or mortgage their homes, and risk becoming trapped.
The watchdog is demanding the removal of ground rent terms which officials think are unfair from all existing Countryside and Taylor Wimpey contracts to make sure they are no longer in breach of the law.
Bosses must also agree not to use the terms again in any future leasehold contracts, or risk future sanctions.
Andrea Coscelli, CMA chief executive, said: “These ground rent terms can make it impossible for people to sell or get a mortgage on their homes, meaning they find themselves trapped. This is unacceptable.
“Countryside and Taylor Wimpey must entirely remove all these terms from existing contracts to make sure that they are on the right side of the law.
“If these developers do not address our concerns, we will take further action, including through the courts, if necessary.”
Housing Secretary Robert Jenrick said unfair practices, including crippling ground rents, have “no place in our housing market”.
He added: “This behaviour must end and I look forward to appropriate redress being forthcoming for leaseholders.
“The Government is pursuing the most significant reforms to leasehold in forty years, including by protecting future homeowners, restricting ground rents in new leases to zero and ending the use of leasehold in new houses altogether.”
Countryside and Taylor Wimpey now have the opportunity to respond to the CMA’s detailed concerns and avoid court action by signing formal commitments to remove the ground rent terms from their leasehold contracts.
The investigation will continue, including into investment firms which bought freeholds from developers and continue using the contracts.
Taylor Wimpey said in a statement: “We will continue to co-operate with the CMA and work with them to find a satisfactory resolution, within the required timescale.”
The company pointed out it stopped selling leases containing 10-year doubling ground rent clauses on new developments from January 2012 and set aside £130 million to cover the cost of conversions for customers to inflation-linked leases.
Countryside said in a statement: “Countryside has sold no properties with doubling ground rent clauses since 2017 and we introduced the Ground Rent Assistance Scheme in 2020 to assist leaseholders whose ground rents doubled more frequently than every 20 years.
“We will continue to engage constructively with the CMA to resolve this complex issue. Alongside these discussions, its resolution will require the engagement of a number of other parties, including certain freehold owners, for a satisfactory solution to be found.”