Last October, the CMA started enforcement action against four housebuilders over leasehold arrangements on their houses.
Taylor Wimpey and Countryside were cited for unfair ground rent contract terms while Barratt Developments PLC (LON:BDEV) and Persimmon Homes PLC (LON:PSN) faced action over the possible mis-selling of leasehold homes.
In a statement today, the CMA said it has now written to Taylor Wimpey and Countryside outlining specific concerns about contracts that can see the cost of ground rents doubling every ten to fifteen years.
The CMA said the contracts break consumer protection law, affects owners’ property rights and can mean owners struggling to sell or mortgage properties.
All terms that the CMA considers to be unfair have to be removed by the two companies and cannot be used again said the letter.
To avoid court action, the competition authority added the two companies have to sign formal undertakings to cease and remove unfair terms from leasehold contracts.
Investment firms that have bought blocks of the leases from the two developers are also under investigation said the CMA, while the probe into Barratt and Persimmon remains ongoing.
Andrea Coscelli, CMA Chief Executive, said: “These ground rent terms can make it impossible for people to sell or get a mortgage on their homes, meaning they find themselves trapped.
“This is unacceptable. Countryside and Taylor Wimpey must entirely remove all these terms from existing contracts to make sure that they are on the right side of the law.
“If these developers do not address our concerns, we will take further action, including through the courts, if necessary.”
Shares in FTSE 250 constituent Countryside dropped 1% to 518.5p while FTSE 100 member Taylor Wimpey fell 1% to 183p.