Leasehold sector under review and milestone commitments secured for leaseholders – by Lisa Bartlett

Lisa Barlett

In recent years the Competition and Markets Authority (“CMA”) has been investigating potential breaches of consumer protection law in the leasehold housing market. The CMA has identified a number of areas of concern where it proposes to take action to address significant harm to leasehold homeowners and where it considers changes to the law would be required to prevent future harm. These are summarised briefly as follows:

  • High or escalating ground rents in leases which create difficulty for homeowners in selling or mortgaging their homes. In some circumstances a Leasehold tenancy is deemed, or may become, an ‘assured  tenancy’ under the Housing Act 1988, putting homeowners security at risk and possibly enabling a freehold landlord to take possession of a leasehold property;
  • Retail Price Index (RPI) linked increases to ground rent; and
  • Unfair contract terms in leases, the mis-selling of leasehold houses by some developers and fees and service charges being charged by some landlords or their managing agents which may not be set out in the lease. For example, some leaseholders have been led to believe they could purchase the freehold at a certain price, to then have that price subsequently significantly increased at a later date without warning.

As part of its investigation, in September 2020 the CMA launched enforcement action against a number of developers in connection with its identified areas of concern.

In what has been described by the CMA as “a real win for thousands of leaseholders”, the CMA has recently announced that it has secured the following undertakings:

  • Aviva have agreed to remove clauses from leases that were doubling the ground rents payable every 10 to 15 years or doubling ground rent clauses which were converted into RPI-based ground rents. The ground rent will revert to that payable at the grant of the lease and will not increase. Aviva has agreed to repay homeowners the excess money they have paid pursuant to a doubling ground rent clause.
  • Persimmon Homes have agreed to offer leasehold house owners the option to buy their freehold at a discount and it will make repayments to certain homeowners that have already bought their freehold. Prospective buyers will be given longer reservation periods and more information upfront about the annual costs of owning the property.

This recent announcement by the CMA brings positive news and should be seen as a step in the right direction for some, albeit not all, residential leaseholders. For those who are not going to be directly affected by the undertakings from Aviva or Persimmon Homes, it should provide a small degree of comfort that other developers, insurance companies and investors may fall into line or otherwise expect to face legal action from the CMA.

The government has pledged to reform the system. For more detailed information on the CMA’s review please visit the leasehold case page.

How we can help

We offer a full lease review service prepared on a fixed fee basis in the event that you have any concerns with regards to your existing lease or a proposed lease that you are looking to enter into.

As part of our services, we complete a full review of the lease and report to you, which will highlight any potential or existing issues within the lease. The report will enable you to decide whether you wish to re-negotiate any part of the proposed lease, or any remedial action you may consider taking with regards to your current lease.

How we can help

It is impossible to provide definitive timescales, however where we have made an application on your behalf we will monitor progress and keep you updated. In circumstances where it is appropriate to request an expedite on your behalf, we will do so and keep you informed of progress.

To find out how we can assist, contact our experts 0161 330 6821 or email our new enquiries team at newcorporate&commercialenquiries@bromleys.co.uk for your free initial telephone discussion. If you prefer, you can fill in our online form or alternatively, you can email us on bromleys@bromleys.co.uk and we’ll call you back.