Service charges and other issues
A guide to service charges, administration charges, ground rent, recognised tenants associations and forfeiture.
11th June, 2019
The Competition and Markets Authority (CMA) announced today that is has formally launched an investigation to find out whether people are being treated fairly when buying their home.
The investigation follows ongoing concerns regarding the fairness, clarity and presentation of some leasehold contract terms, which could lead to people being stung by costly fees over a long period or having to abide by onerous terms.
The CMA’s consumer protection law investigation will examine two key areas:
Potential mis-selling: whether people who have bought a leasehold property are given the information they need to fully understand the obligations they are taking on, for example the requirement to pay ground rent over a certain period of time, or whether they have an accurate understanding of their ability to buy their freehold.
Potential unfair terms: whether people are having to pay excessive fees due to unfair contract terms. This will include administration, service, and ‘permission’ charges – where homeowners must pay freeholders and managing agents before making home improvements – and ground rents, which in some cases can double every 10 years.
At this early stage, the CMA has not reached a view as to whether or not any person or company has broken consumer protection law.
George Lusty, Senior Director for Consumer Enforcement, said:
“Buying a home is one of the most expensive and important purchases a person can make. So, it’s essential they fully understand the contract they are signing – including whether they will have to pay more than they bargained for.
“Our investigation will shed light on potential misleading practices and unfair terms to help better protect people buying a home in future.”
LEASE’s Chair, Wanda Goldwag, said:
“We are pleased with the swift delivery of this investigation; we will continue to offer the CMA help where possible.”
The CMA will shortly be writing to a range of market participants – including developers, lenders and freeholders – requiring information to understand more about how leaseholds are sold and managed, and the terms their contracts contain. The CMA also wants to understand the impact such practices have on homeowners, and so is calling on people to share experiences that could be relevant to its work.
If the CMA thinks that a company’s practices are misleading – or that its contracts contain unfair clauses – it could take enforcement action to require the company to change how they operate.
Further information relating to this investigation can be found on the case page. This includes how people can share relevant information.
More information you might find useful:
- Who is the CMA?
- What is the CMA doing about residential leasehold property?
- What will the CMA’s investigation cover?
- What is an unfair term?
- What is a consumer contract?
- What happens when contractual terms are unfair?
- Will leaseholders who have been mis-sold property be able to provide their experiences?
- What happens when the CMA has finished its investigation?
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