Thousands of homeowners will be freed from toxic leasehold contracts in a landmark victory for campaigners.
Housing developer Persimmon has agreed to sell freeholds to leaseholders at a discounted price, while insurance and investment giant Aviva will refund up to 1,000 families whose ground rent bills doubled. Pressure is now piling on other developers that saddled homes with toxic deals and the investment firms that bought freeholds to cash in.
The competition watchdog warned last night that firms could face legal action if they do not rectify the situation. There has been a campaign calling for an end to the scandal of buyers missold homes with onerous costs buried in contracts. It left leaseholders unable to sell homes lumbered with soaring ground rent bills, or forced to pay over the odds for a freehold sold to an investor.
Around 4.5million homeowners do not own the freehold of their property. Some have been unable to sell either because the clauses are unattractive to buyers or because lenders will not grant mortgages on the property. Many buyers claim they were not properly informed about the onerous contracts. Persimmon has now agreed to cap the price of freeholds on its houses at £2,000 - a 47% discount on the £3,750 its homeowners currently pay on average. The builder, which reported a £784million pre-tax profit for last year, will also refund any families who paid more for their freehold and are still in their homes. The pledges, which come after an investigation into unfair practice by the Competition and Markets Authority (CMA), could help almost 10,000 homeowners and are expected to cost the firm millions.
Aviva, which bought freeholds from developers, has agreed to remove conditions that meant that some ground rents doubled every ten to fifteen years. Charges will be set to what they were at purchase and up to 1,000 homeowners will get a refund.
CMA chief 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. But our work isn't done. We now expect other housing developers and investors to follow the lead of Aviva and Persimmon.'
The CMA launched enforcement action against developers Countryside, Taylor Wimpey, Persimmon, and Barret Homes in September last year. The case is still in progress , although the regulator has dropped its misselling probe into Persimmon.