Competition & Markets Authority obtains undertakings that benefit flat owners

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In January I wrote about proposals to reform the leasehold system in England & Wales.

While we await more developments on that front, the Competition and Markets Authority (the CMA) has recently obtained “undertakings” from Persimmon Homes and Aviva that will benefit flat owners and owners of leasehold houses stuck with “toxic” ground rents.

These undertakings come off the back of investigations launched in 2019 into potential breaches of consumer protection law in the leasehold housing market. The CMA was concerned about alleged mis-selling of leasehold properties and unfair contractual terms in relation to, amongst other things, ground rents that increase exponentially over relatively short periods of time.

Against the threat of formal action, the CMA has secured undertakings from Persimmon Homes and Aviva to:

  • In the case of Persimmon Homes – offer leasehold house owners the option to buy their freehold at a discount equating to what they reasonably expected when they bought their house.
  • In the case of Aviva – remove from leases clauses that were doubling the ground rents payable every 10 or 15 years. The ground rent will be re-set to the sum that was payable at the start of the lease. Aviva will also repay flat owners’ money they have already paid under their doubling ground rent clauses.

The CMA has stated that these undertakings are a “real win” for thousands of leaseholders. It has also stated that it expects other investors and housing developers to follow Persimmon’s and Aviva’s example or face legal action from the CMA.

And so, the pendulum continues to swing (albeit slowly) back in favour of leaseholders.