Developers ‘misled and took advantage’ of people buying leasehold property, watchdog finds
Housebuilders are in the firing line as the competition watchdog revealed it has found ‘troubling evidence’ that leasehold homes were mis-sold.
Some 100,000 families across the country are currently trapped in unsaleable homes due to the restrictive terms in their leasehold contracts.
The Competition and Markets Authority (CMA) said it has evidence that these families may not have been given enough information about what they were signing up to when the homes were sold.
In some of the worst cases, home buyers may have even been lied to when asking direct questions about their leasehold contracts.
It also revealed a litany of concerns over the way that developers have sold leasehold properties, including the way that ground rents, fees, and the cost of buying freeholds were and are explained to buyers.
The CMA said it is concerned over the costs of ground rent, the cost of converting their leasehold to freehold ownership, and the cost of unreasonable fees.
It also claimed that some developers are failing to explain the differences between leasehold and freehold when directly asked, with some even telling potential buyers that there is no difference between the two.
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, the CMA found.
Lastly, the Authority is concerned that ‘excessive and disproportionate’ fees for things like the routine maintenance of a building’s shared spaces or making home improvements are being charged.
The CMA said it is now preparing to launch ‘direct enforcement action’ against companies it believes have broken consumer protection law.
This could result in firms signing legal commitments to change how they do business. If they fail to make the required changes, the CMA could take action through the courts to make them comply with the law.