As part of its ongoing investigation, the CMA has today (4th September) opened enforcement cases focusing on certain practices of Barratt Developments, Countryside Properties, Persimmon Homes, and Taylor Wimpey.
The move comes after the CMA uncovered troubling evidence of potentially unfair terms concerning ground rents in leasehold contracts and potential mis-selling.
The CMA’s action relates to multiple areas of concern, including mis-selling ground rents, people being misled about the availability of freehold properties and the cost of converting their leasehold to freehold ownership, and developers using unfair sales tactics — such as unnecessarily short deadlines to complete purchases — to secure a deal.
Another area of concern is the use of unfair contract terms that mean homeowners have to pay escalating ground rents, which in some cases can double every 10 years.
In addition, the CMA will be looking further into ground rent increases based on the retail price index (RPI) and may take enforcement action if it finds evidence of unfair practices in relation to these.
The CMA will also be investigating certain firms which bought freeholds from these developers and have continued to use the same unfair leasehold contract terms.
The authority has requested information from the four developers.
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How the case proceeds will depend on the CMA’s assessment of the evidence.
Possible outcomes include legal commitments from the companies to change the way they do business or, if necessary, the CMA could take firms to court.
Andrea Coscelli, chief executive at the CMA, 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.”
Andrea added that the CMA is also sending letters to a number of other developers, encouraging them to review their practices to make sure they are treating consumers fairly and complying with the law.
Anna Bailey, CEO at the Leasehold Group, commented: "We have been fighting for the rights of leaseholders for 18 years and finally we are starting to see positive action following the largely ineffective pledge made by builders.”
She claimed that there had never been any justification for selling new houses as leasehold and that it had simply been a way for housebuilders to “enhance their profits at the expense of buyers”.
“We have always said that the only way to address the practice was by positive action, so we are delighted that the CMA is finally showing its teeth and hope that this change in stance will herald the beginning of the end of the new-build leasehold scandal.