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Competition & Markets Authority launches enforcement action

4th September, 2020

The Competition and Markets Authority (CMA) has announced today that it is launching enforcement action involving four leading housing developers it believes may have broken consumer protection law in relation to leasehold homes.

As part of its ongoing investigation into the leasehold market, the CMA is opening enforcement cases focusing on certain practices of:

The move to launch enforcement action comes after the CMA found troubling evidence of potentially unfair terms concerning ground rents in leasehold contracts and potential mis-selling. The CMA is concerned that leasehold homeowners may have been unfairly treated and that buyers may have been misled by developers.

The CMA’s enforcement action relates to the following areas of concern:

Mis-selling

Unfair contract terms – ground rents

In addition to these issues, the CMA will also be looking further into ground rent increases based on the Retail Price Index (RPI) and may take enforcement action should it find evidence of unfair practices in relation to these. In particular, the CMA is concerned about the fairness of escalating ground rent terms linked to RPI and that these are not always effectively explained by developers when discussing RPI-based ground rent with prospective homeowners.

The CMA will also be investigating certain firms who bought freeholds from these developers and have continued to use the same unfair leasehold contract terms.

The CMA has now written to Barratt, Countryside, Persimmon, and Taylor Wimpey outlining its concerns and requiring information.

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, CMA Chief Executive, 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.”

LEASE’s Chair, Wanda Goldwag, said:

“This is a great step forward for leaseholders. We are pleased to hear the announcement of enforcement action, and we will continue to support the CMA where possible.”

Alongside its enforcement action, 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.

For people who own, or are looking to buy, a leasehold property, the CMA has worked with LEASE to produce written and video guidance. The guidance offers advice on a number of issues, including what leaseholders can do if they are faced with fees or charges that they consider unjustified.

The CMA will continue to work with the Government on its reform plans for the leasehold market, including supporting the move to ban the sale of new leasehold houses and reduce ground rents for new leases to zero.

Other information:

Ministry of Housing, Communities and Local Government logo

LEASE is governed by a board, appointed as individuals by the Secretary of State for the Ministry of Housing, Communities & Local Government.

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