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Aviva and Persimmon to shake-up leasehold clauses and refund some homeowners - here's what it means for you

Aviva and Persimmon to shake-up leasehold clauses and refund some homeowners - here's what it means for you

Thousands of homeowners with Aviva and Persimmon leases are set to benefit following a crackdown on unfair terms by the Competition and Markets Authority - some will also be refunded certain costs. It follows concerns these leaseholders may have found themselves trapped in homes they've struggled to sell due to doubling ground rent clauses and unaffordable freehold prices.

The Competition and Markets Authority (CMA) first opened an investigation into a number property firms in September 2020 after it said it had uncovered "troubling evidence" of potentially unfair terms and mis-selling. But housebuilder Persimmon and investment firm Aviva, which bought leasehold contracts from property developers, have both agreed to a number of crucial changes to help homeowners.

In addition, investment firms Brigante Properties, Abacus Land, and Adriatic Land have been told to remove doubling ground rent clauses from the leases they own. They now have the opportunity to respond to the CMA’s concerns and can avoid court action by agreeing to remove such terms. The CMA's investigation into Barratt Developments, Countryside Properties and Taylor Wimpey is still ongoing.

Around 4.5 million people in England currently own their home on a leasehold basis - typically flat owners and some new-build property owners. This means while you own the property, you don't own the land it sits on. The land is instead owned by a freeholder, which can be an individual or a management company, and you typically have to pay rent to them on an annual basis (known as 'ground rent') for a set number of years. See our What is a leasehold? guide for more info on how they work. 

Aviva is to axe doubling ground rent clauses

Here are the key changes Aviva has agreed to: 

  • Axe leasehold clauses that allow ground rents to double or increase in line with the Retail Prices Index (RPI) measure of inflation. These clauses can mean people struggle to sell or mortgage their homes, but going forward, these leaseholders’ ground rents will now revert to the original amount when the property was first sold – and this will not increase over time.

    This includes ALL existing leases with 10 to 15 year doubling ground rent terms, including those converted to RPI-based terms. It's thought this will help around 1,000 people. 

    In addition, if Aviva buys any new leasehold contracts in future it will need to offer to remove doubling ground rent or inflation-linked clauses.

  • Refund hundreds of freeholders who've paid for doubling or inflation-linked ground rent increases. The investment firm has agreed to repay homeowners by refunding the excess money they would have paid due to such clauses.

    The CMA says it's too early to say at this stage how much people will be refunded or when they'll get their money back, but if you're affected you will hear from Aviva within the next 90 days. You can also contact Aviva for more information via its contact web page. Aviva will also update its website with more info on this in due course. 

Persimmon is to offer discounted freeholds

Persimmon has agreed to do the following after the CMA action: 

  • Offer thousands of leasehold home owners the chance to buy the freehold of their property at a discounted price. Persimmon told us it stopped selling leasehold homes in 2017 and introduced a new 'Right to Buy' scheme, which allows people to buy their freehold at below market-value with the price capped at £2,000. This scheme will now been extended to cover any leasehold home bought on or after 1 January 2000 until 31 December 2026.
  • Refund thousands of people who've already purchased their freehold and paid more than expected. This addresses concerns raised by consumers with the CMA, and local Trading Standards, that they were led to believe they could buy their freehold at a certain price, only to find out later that this price had increased by thousands of pounds with no warning. Anyone who has already acquired their freeholds from Persimmon, and who still owns the freehold, can apply to be reimbursed for the difference between the price paid and the new Right to Buy cap of £2,000. 

    The CMA says it's too early to say when you'll get your money back but if you're affected you will hear from Persimmon within the next 90 days. Persimmon has also established a dedicated national freephone helpline number - 0800 915 6722 - which leaseholders can call for more information. Alternatively, further information can be found at on Persimmon's website

'This is a real win for leaseholders'

It's worth pointing out that the CMA told us its concerns regarding both companies were very different, which is why both Aviva and Persimmon have different commitments to agree to.

For example, Persimmon doesn't include doubling ground rent or inflation-linked clauses in its leases, while Aviva hasn't been found to give misleading info on freehold prices. If they don't comply, the CMA could take both firms to court to enforce them to act. 

Andrea Coscelli, chief executive of the CMA, 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. Now, they can breathe a sigh of relief knowing things are set to change for the better."

What does Aviva and Persimmon say?

A spokesperson for Aviva said: "Where Aviva is the current freeholder, the Fund has agreed that all leases with 10- and 15-year doubling ground rent terms, including those that have been converted to RPI-based review terms, will be CHANGED to remove the rent review provisions. Those leaseholders’ ground rents will revert back to the original amount – i.e. when the lease was first granted – and this will not increase over time."

Dean Finch, group chief executive for Persimmon said: "Building on our existing Right to Buy scheme, this agreement provides a fair deal for all leaseholders of Persimmon built houses, extending the opportunity to purchase their freehold at a price well below market value."

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