The Competition and Markets Authority (CMA) is set to launch enforcement action against housing developers who have unfairly treated leasehold homeowners and misled prospective buyers. This after evidence of possible mis-selling and unfair contract terms were found.

The following is a list of the potential violations raised by the CMA:

* Ground rents: homeowners having to pay escalating ground rents, which in some cases can double every 10 years. This increase is often built into contracts, meaning people can often struggle to sell their homes and find themselves trapped.
* Cost of the freehold: the CMA has seen evidence that people have been misled about the cost of converting their leasehold to freehold ownership. When buying their home, some people were told the freehold would cost only a small sum, but later down the line this price had increased by thousands of pounds with little to no warning.
* Misleading information: not being told upfront that a property is leasehold and what that means. Some developers are failing to explain the differences between leasehold and freehold when directly asked, and some actually tell potential buyers that there is no difference. By the time people find out the realities of owning a leasehold, including the regular charges to be paid, they are often unable to pull out of the purchase, or would face significant difficulties if they tried to do so.
* Unreasonable fees: being charged excessive and disproportionate fees for things like the routine maintenance of a building’s shared spaces or making home improvements. If people want to challenge such charges, the process is often difficult and costly, meaning few people decide to go through with it.

According to the CMA’s Chief Executive, Andrea Coscelli:

“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.”

Launching a direct enforcement action, the CMA is completing the legal work against the companies it believes to have broken the consumer protection law, which could result in property firms signing legal commitments to change the way they do business. Failure to comply and make the necessary changes would compel the CMA to pursue legal actions against these firms.

The evidence found by the CMA lends credence to the case for changes in the leasehold market. CMA will continue to work with the Government’s reform plans, including support to ban the sale of new leasehold houses and reduce ground rents for new leases to zero.

CMA is also looking to develop consumer advice for owners or buyers of leasehold properties as part of its services; offering tips on what they could do when subjected to fees and charges that they think is unjustified.


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