Developers under investigation over leasehold trap

Britain’s competition watchdog is investigating four of the country’s top housebuilders over the way they are selling leaseholds.

The Competition Market Authority’s (CMA) year long investigation into Barratt Developments, Countryside Properties, Persimmon Homes and Taylor Wimpey has now been escalated and the four are facing enforcement action.

Ripping off

All four are accused of ripping off their customers through the selling of the leasehold on their homes.

A spokesman for the CMA said there was ‘troubling evidence’ of potentially unfair terms and mis-selling of leasehold contracts.

Unfair sales tactics

The watchdog’s four pronged investigation has been examining ground rents, the availability of freehold, the costs associated with freehold and unfair sales tactics.

Evidence was found of some people being told homes on a particular estate would only be sold leasehold and later others were sold as freehold.

Others were told they would have the chance to buy the freehold for a small sum which later escalated to thousands of pounds.

Ground rent

It also found evidence of unfair contract terms which forced homeowners to pay ground rent which could double every 10 years.

A spokesman said the practice could lead to some owners struggling to sell their homes, finding themselves trapped as ‘leasehold prisoners’.

As part of the on-going probe the CMA will be examining ground rent increases against inflation and has promised to take action if it finds evidence of unfair practices.

Unacceptable

CMA chief executive, Andrea Coscelli, said: “It is unacceptable for housing developers to mislead or take advantage of homebuyers.

That’s why we’ve launched today’s enforcement action.

“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.”

Information

The authority has now written to all four builders demanding information about their methods of operation.

It is also telling other firms to review their own policies.

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.”

Full co-operation

Taylor Wimpey said it would continue to give the CMA full co-operation.

Persimmon said: “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’.

Widened

The investigation has now been widened to include firms who bought freeholds from the developers and then continued to use ‘the same unfair leasehold contract terms’.

It will continue to work with the government to ban the sale of new leasehold houses and reduce ground rents for new leases to zero.

Shameful practices

Housing Secretary Robert Jenrick said: “Shameful practices of the kind set out by the CMA have no place in our housing market and we are going to put an end to them.

“I want to see homeowners who have been affected by crippling ground rents swiftly obtain the justice and redress they deserve.

“Developers and freeholders must rectify the problems and ensure these disgraceful practices never happen again.”