Aviva is to repay leaseholders whose ground rent has doubled and Persimmon Homes is to give leaseholders the option of buying their freehold at a discounted price following pressure from the Competition and Markets Authority.

The watchdog has secured these voluntary “undertakings” from the companies as part of its investigation into the sector.

Aviva to remove ground rent terms the CMA considers unfair such as clauses that cause the payments to double every 10 or 15 years, which mean that leaseholders often struggle to sell their homes.

It will also remove terms which were originally doubling clauses and have been converted into RPI-based ground rent terms. 

Where Aviva is the current freeholder, ground rents will revert to the original amount stated when the property was first sold and this will not increase over time.

Aviva has agreed to repay homeowners who were affected by these doubling ground rent clauses. 

This means that, where ground rents have increased, leaseholders will be refunded the excess money they have paid over this time.

Meanwhile, Persimmon will offer leasehold house owners the option to buy the freehold of their property at a discount, better reflecting what they expected when they originally bought their house.

It will also make repayments to certain homeowners who have already purchased their freeholds. 

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. 

Persimmon has also agreed to extend the timeframe that prospective buyers are given to exchange contracts after reserving a property, and to provide people with more upfront information about the annual costs of buying a home. 

This is to address concerns that the “reservation period” – or the window in which a buyer must take steps to progress the purchase – is too short and can pressure consumers into making decisions without enough information up-front. 

The agreements come after the CMA launched enforcement action against four housing developers in September 2020. 

The CMA has also been investigating several investment firms that bought a large number of freeholds from two of these developers and continued to use these same ground rent terms.

The regulator has also written to the investment groups Brigante Properties, and Abacus Land and Adriatic Land, setting out its concerns and requiring them to remove doubling ground rent terms from their contracts in order to avoid court action.

CMA chief executive Andrea Coscelli says: “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.

“It’s 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.”

Housing Secretary Robert Jenrick says: “The government asked the CMA to conduct this investigation – and I welcome their efforts to bring justice to homeowners affected by unfair practices, such as doubling ground rents, which have no place in our housing market.

“This settlement with Aviva and Persimmon is a hugely important step and demonstrates our commitment to support existing leaseholders who may have been mis-sold properties.

“We have also introduced new legislation that will protect future homeowners by restricting ground rents in new leases to zero and I would strongly urge other developers to follow suit in amending their historic practices.”

Propertymark chief policy adviser Mark Hayward says: “This is another positive step in remedying  the leasehold scandal that has impacted far too many people for so long. 

“Leasehold house owners have lived with untold anxiety, knowing that their homes were essentially unsellable. 

“The CMA’s action will help those whose freeholds are with Aviva and Persimmon; other house developers and investors must now commit to make similar undertakings to ensure all leasehold house owners can move forward with their lives. 

“Our research found that 57% of leaseholders had no idea what buying a leasehold home meant until after they had gone through with the purchase and 94% regret doing so.”