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22 Dec 2021

Leasehold scandal: Taylor Wimpey to remove ground rent doubling clauses after watchdog intervention

New reforms could make it easier for leaseholders to remortgage or sell

The housebuilder Taylor Wimpey will remove onerous ground rent 'doubling' clauses from leases, after an investigation by the Competition and Markets Authority (CMA).

The announcement could provide a boost to thousands of embattled leaseholders who were struggling to remortgage or sell their homes.

Here, Which? explains what today's news means for leaseholders, and provides an update on the CMA's investigation into leasehold mis-selling.

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Taylor Wimpey to remove onerous ground rent clauses

The CMA has announced that Taylor Wimpey has agreed to remove ground rent doubling clauses from all of its leases.

Doubling clauses, which were the subject of a Which? investigation in 2018, usually involved the leaseholder's annual ground rent doubling in cost every 10 years.

This means homeowners could potentially see their annual payment rise from a few hundred pounds a year to tens of thousands of pounds a year.

The mere presence of such clauses meant many affected leaseholders could no longer remortgage or sell their properties.

What does this mean for Taylor Wimpey leaseholders?

Taylor Wimpey has long faced criticism for installing doubling clauses in its leases, and today's announcement means nobody who has bought a Taylor Wimpey house - either directly from the developer or second hand, should see their ground rent increase.

Instead, ground rents will revert to the amount that was originally payable when the property was first sold.

What if I converted my lease?

Leaseholders who used Taylor Wimpey's Ground Rent Review Assistance Scheme will also be affected.

The scheme involved the developer agreeing to amend leases so that ground rents rose by RPI (a measure of inflation) rather than doubled.

The CMA believes that doubling clauses should have been abolished completely rather than replaced by another measure.

Taylor Wimpey has now agreed to amend leases so that RPI increases will also be removed and ground rent will be reverted back to the original amount.

What if Taylor Wimpey has sold my freehold?

Taylor Wimpey was one of several developers that sold the freeholds of some of its properties to third-party investors.

If Taylor Wimpey has sold the freehold of your property - and therefore can't remove the ground rent doubling clause itself - it will make a payment to the current freeholder to convert the lease, once the freeholder has given a commitment to the CMA that it will remove the clause.

CMA to continue investigation into Barratt

The CMA has been investigating potential leasehold mis-selling since February 2020, and earlier this year it took enforcement action against four developers.

Countryside, Persimmon Homes and Taylor Wimpey have all now agreed to concessions, but Barratt Developments remains under investigation.

The watchdog is also investigating three third-party investment companies who bought freeholds from developers - Brigante Properties, Abacus Land and Adriatic Land. All are under review for being freeholders of leases with doubling ground rents.

How the government is seeking to overhaul leasehold

The government has been working on overhauling the leasehold system since 2017, and earlier this year it announced a number of proposals.

It will ban new-build houses from being sold as leasehold and allow leaseholders to extend their leases for 990 years, abolishing their ground rent payments in the process.

An online calculator will be created to determine how much leaseholders should pay when extending leases or buying freeholds, potentially stopping freeholders from quoting inflated prices.

Finally, the government is to set up a 'commonhold council' in preparation for the widespread introduction of commonhold in the future.

Commonhold involves buyers of flats owning the freehold to their individual property and forming a management company with other residents in their block - thereby putting themselves in control of service charges, and removing the need for third-party freeholders and management companies.

At this stage, there is no clear timeframe as to when the reforms may come into force.

Leasehold scandal: a timeline

Today's announcement marks another step towards issues with leasehold houses and punitive ground rents finally being addressed.

In June 2018, Which? published an explosive investigation into the leasehold scandal, speaking to nearly 200 leasehold homeowners who faced spiralling costs - from ground rent doubling clauses to expensive permission fees. You can find out more in the following stories we've covered since 2017: