Chief executive of the CMA (Competition and Markets Authority) Andrea Coscelli said, “It is unacceptable for housing developers to mislead or take advantage of homebuyers.” “Everyone involved in selling leasehold homes should take note: if our investigation demonstrates that there has been mis-selling or unfair contract terms, these will not be tolerated.” The CMA has demanded information from the developers and could go to court as the watchdog said there was troubling evidence of mis-selling and potentially unfair terms. An estimated 100,000 people have been affected.
Millions of properties in England and Wales have been sold as leaseholds with the buyer having to pay ground rent to the owners of the freehold as well as getting a mortgage to live in the property. Buyers of new homes have discovered that they are tied into contracts that see ground rents increase substantially and that the freehold has sometimes been sold on to a third-party. Some homeowners have also faced large fees upon completing basic home improvements or for planning extensions to their property. Campaigners have described the situation as “fleecehold”.
The CMA has found that, in certain circumstances, buyers of leasehold properties had ground rents that doubled every decade and that others were incorrectly informed that they were unable to buy the freehold on a site. The watchdog said it also had concerns over mis-selling and pressure being put on potential buyers to complete a house purchase quickly. Some were also told that they would be able to buy the property’s freehold for a small sum only to find out later that the cost increased to many thousands of pounds. This had led to a perception from some that they will “never be able to sell”.
Of the four housebuilders named by the CMA Barratt Developments said, “The group is committed to putting its customers first and will continue to co-operate with the CMA whilst it completes its investigation.” Taylor Wimpey said it would continue to co-operate fully with the CMA, Persimmon said it stopped selling leasehold houses in 2017 where it owned the land freehold and added, “Any customers of a Persimmon leasehold property in the last six years have been given the right to buy their lease at below market value and many have done so.”
Countryside Properties said it was “committed to resolving this issue to the satisfaction of our customers”.