Leasehold mis-selling – the housing industry PPI?

Campaigners are calling for quick and decisive action on the mis-selling of leaseholds on the UK property market, dubbing it ‘the PPI of the housing industry’

Sales of leaseholds on new properties containing excessive ground rent and multiplier clauses have been the subject of a full investigation by the Competition and Markets Authority (CMA) who are said to be planning enforcement action to stop the mis-selling.


But the campaigners are calling for legislation to regulate the market with one solicitor saying: “Without doubt if this isn’t dealt with swiftly we will be faced with the PPI of the housing industry.”

Property solicitor Adam Fletcher added: “This needs to either be capped at £250 per property for properties outside London and £1,000 for London or dealt with as a peppercorn.”


The complaints are against developers who have been mis-selling the ground rents on new properties or including unfair contract terms.

The CMA investigation found that leaseholds were being written with escalating ground rent charges which can double every 10 years in some cases, making it difficult for the householder to sell their home.


There was also evidence that buyers had been misled about the cost of buying the leasehold to their property.

At the point of sale they were told that to buy it would cost just a small amount only to be told later that the price had increased to thousands of pounds.

Fees for maintenance of properties were described as ‘excessive and disproportionate’ with some leaseholders being charged to carry out repairs on their own homes.

Spectacularly vindicated

The Leasehold Knowledge Partnership (LKP), a charity supporting leaseholders, has previously claimed that firms have been ‘dumping their customers into rip-off homes, coaxing them into using solicitors who did not point out onerous terms and then flogging off the freeholds to predatory speculators, who rack up permission fees under the leases”.

Now it says its long campaign has been ‘spectacularly vindicated’.


Property litigation specialist Matt Pugh is not sure whether the CMA’s intervention will stop the practices.

He said: “Whether action by the CMA results in any sort of slowdown in the leasehold market, and in the viability of certain developments, remains to be seen.”

The CMA has said it will continue to work with the government on its reform plans for the leasehold market, including the banning of the sale of leaseholds on new properties and reducing existing ground rents to zero.

Huge progress

The Housebuilders Federation said the industry had made ‘huge progress’ in identifying the issues and addressing them.

A spokesman added: “The number of escalating ground rent leases identified by CMA represents a very small percentage of the leasehold properties built and sold over the past 20 years.

“Builders’ focus remains on ensuring new-build owners and future buyers are treated fairly and have access to remedies where processes have fallen short.”