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Aviva and Persimmon to repay ground rent on unfair leases

Other housing developers and investors face legal action if they don't follow the lead of Aviva and Persimmon

Aviva PLC -
"A real win for thousands of leaseholders" said the CMA

Aviva PLC (LON:AV.) and Persimmon PLC (LON:PSN) agreed to abandon 'doubling ground rent' leases and reimburse buyers of houses with them.

The Competition and Markets Authority (CMA) said life and pensions giant Aviva would remove any clause the regulator considers unfair and pay back the affected homeowners.

In future, Aviva will link ground rents to the UK RPI inflation index or go back to the original amount when a property was first sold if the company is the freeholder.

Housebuilder Persimmon, meanwhile, will give homeowners the chance to buy their freehold at a discount.

The freehold on any house sold after the year 2000 will be available to buy for £2,000, it said, while homeowners who have already bought a freehold through the builder’s right-to-buy scheme will get back the difference between what they paid and £2,000.

Leaseholder clauses have become a huge problem for some owners with the doubling clause effectively blighting the property if an owner tries to sell in the future as the ground rent would eventually exceed the original cost of the house.

Andrea Coscelli, the CMA’s chief executive, described today's agreement as "a real win for thousands of leaseholders".

“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.”

Dean Finch, Persimmon’s chief executive, said: "Persimmon has not historically sold leasehold houses in high volumes and introduced a Right to Buy scheme for leaseholders in 2017.

“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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