Shares in the UK’s third biggest house builder Taylor Wimpey (TW.) were unchanged at 170p after the firm said it would drop its controversial ground rent clause after a year-long CMA (Competition and Markets Authority) investigation.
In September last year the CMA launched enforcement actions against four house builders - Barratt Developments (BDEV), Countryside Properties (CSP), Persimmon (PSN) and Taylor Wimpey - for using possibly unfair contract terms or mis-selling leasehold homes.
DOUBLE TROUBLE
In Taylor Wimpey’s case, the firm was blasted for selling houses with leaseholds which included a clause doubling the ground rent every 10 years. The CMA ruled that the increase meant some homeowners struggled to sell their houses on or get a mortgage while others risked losing their home if they fell behind on the ground rent.
Taylor Wimpey originally agreed to remove the doubling clause but replaced it with one which meant ground rents increased in line with the retail price index. However, the CMA decided that was also unfair, so today the company agreed to remove the clause altogether.
Thanks to the CMA’s action, affected Taylor Wimpey leaseholders will see their ground rents remain at the original amount - i.e. when the property was first sold - and they will no longer increase over time. Taylor Wimpey also confirmed to the CMA that it had stopped selling leasehold properties with doubling ground rent clauses.
LONE WOLF
CMA chief executive Andrea Coscelli said: ‘This is a huge step forward for leaseholders with Taylor Wimpey, who will no longer be subject to doubling ground rents. These are totally unwarranted obligations that lead to people being trapped in their homes, struggling to sell or obtain a mortgage.
‘Other developers and freehold investors should now do the right thing for homeowners and remove these problematic clauses from their contracts. If they refuse, we stand ready to step in and take further action - through the courts if necessary’, added Coscelli.
Of the four developers censured last year, Countryside and Persimmon had already agreed to remove the clauses, meaning that after today’s announcement the only firm still under investigation is Barratt Developments.
Taylor Wimpey said it had already set aside provisions to cover the cost of reparations to home owners and leaseholders and it was ‘pleased (our) voluntary undertakings will draw this issue to a full close’.
