CMA considers enforcement action against developers over ‘troubling’ leasehold mis-selling claims
The Competition and Markets Authority (CMA) is set to launch enforcement action against developers after finding “troubling evidence of potential mis-selling and unfair contract terms”.
The watchdog launched a probe into the industry last year and confirmed today that it had found evidence of “serious issues” within the housing sector.
The issues revolve around the unfair treatment of leasehold homeowners as well as prospective buyers being misled.
The CMA is now preparing to take enforcement action against companies it believes to have broken consumer protection law.
However, it is not yet able to say which developers could be targeted.
“We’re in the process of deciding which firms we’re going to take action against,” a spokesperson told City PM “This requires that we consider a number of things, such as which business caused the greatest harm and which cases will have the greatest impact.”
The investigation, which began in June last year, found problems with increasing ground rents built into contracts at unaffordable rates as well as misleading information about the cost of turning a leasehold into a freehold.
It said people had been told this cost would be a small sum but in reality worked out to thousands of pounds more than expected.
The CMA also found that developers were not forthcoming with what a leasehold entails, leaving people unable to pull out of a purchase.
It also said that there were unreasonable and excessive fees for basic maintenance.
Andrea Coscelli, the CMA’s Chief Executive, said: “We have found worrying evidence that people who buy leasehold properties are being misled and taken advantage of.
“Buying a home is one of the most important and expensive investments you can make, and once you’re living there you want to feel secure and happy. But for thousands of leasehold homeowners, this is not the case.
“We’ll be looking carefully at the problems we’ve found, which include escalating ground rents and misleading information, and will be taking our own enforcement action directly in the sector shortly.”
The CMA also said it would continue to work with the government on reforming law in the sector, including a ban on the sale of new leasehold houses and reduced ground rents for new leases to zero.