Thousands of leaseholders will be refunded unfair ground rents and allowed to buy the freehold of their property at a discounted price after a crackdown on property developers by the competition watchdog.
Persimmon Homes and Aviva have agreed to offer the refunds after the Competition and Markets Authority (CMA) uncovered “troubling evidence” that leasehold homeowners and prospective buyers were overcharged and misled by the UK’s biggest housebuilders.
Campaigners described the new commitments as “life-changing” and a “massive milestone” in the battle to secure a fair deal for property buyers, and called for other developers and freeholders to follow suit.
Aviva, an insurance group that bought freeholds from developers, has agreed to remove ground rent terms that are considered unfair and repay homeowners whose rents doubled.
Persimmon has agreed to offer leasehold homeowners the opportunity to buy the freehold of their property at a discounted price, and will make repayments to some homeowners who have bought their freeholds.
Dean Finch, Persimmon’s chief executive, said the company would extend its right-to-buy scheme to cap the purchase price of a freehold at £2,000 for any house leases sold from 1 January 2000 until the end of 2026.
He added that buyers who had already acquired their freeholds from Persimmon under the existing scheme, and who still owned the freehold, could apply to be reimbursed for the difference between the price paid and £2,000.
The housebuilder has also agreed to extend the timeframe that prospective buyers are given to exchange contracts after reserving a property, owing to concerns that a short time limit could pressure buyers into making a purchase they would not have if given more time to consider.
Aviva said it would contact about 1,000 leaseholders to confirm the next steps.
The watchdog’s investigation into unfair leaseholds found in October that leasehold homeowners and prospective buyers were being “trapped” by developers that offered misleading terms and charged excessive fees.
The CMA identified a range of abuses including homeowners having to pay escalating ground rents, which in some cases were planned to double every 10 years, leaving people struggling to sell their homes. Some prospective leasehold homebuyers had been misleadingly told it would be cheap to convert a leasehold to freehold, only to find that the cost had increased by thousands of pounds, with little or no warning.
“Another massive milestone,” the National Leasehold Campaign said in a comment posted on Twitter. “Persimmon & Aviva have eventually done the right thing at last, now other developers and freeholders must follow.”
The inquiry has focused on the UK’s largest housebuilders, and investigations into Barratt, Taylor Wimpey and Countryside are ongoing. They could face legal action if they do not settle with the regulator.
Andrea Coscelli, the chief executive of the CMA, said the voluntary measures agreed by Persimmon and Aviva were “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,” he said.
“It is good that Aviva and Persimmon have responded positively to this investigation, enabling these issues to be fixed for leaseholders. But our work isn’t done. We now expect other housing developers and investors to follow the lead of Aviva and Persimmon. If not, they can expect to face legal action.”
Robert Jenrick, the housing secretary, said the government had introduced new legislation “that will protect future homeowners by restricting ground rents in new leases to zero”. He said he would “strongly urge other developers to follow suit in amending their historic practices”.
