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Competition & Markets Authority to investigate leasehold mis-selling

May, 2019

The Housing, Communities and Local Government Committee (HCLGC) announced today that the Competition & Markets Authority (CMA) had written to its Chairman, Clive Betts MP, expressing its commitment to investigate the mis-selling of leasehold properties. Mr Betts had written to the CMA urging an investigation following evidence heard over the course of its inquiry into leasehold reform.

The investigation by the CMA will examine the extent of mis-selling and whether the most onerous leasehold terms, such as permission fees and doubling ground rents, might constitute ‘unfair terms’ as legally defined.

Briefly, an unfair term is a term in a consumer contract if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract, to the detriment of the consumer.

Clive Betts MP said:

“The Housing, Communities and Local Government Committee report into leasehold laid bare a system in urgent need of reform, where homebuyers are vulnerable to exploitation by freeholders, developers and managing agents. Worse still, we heard extensive evidence from leaseholders regarding onerous ground rent terms, high and opaque service charges and one-off bills, unfair and excessive permission charges, and unreasonable costs to enfranchise or extend leases.

“Over the course of the inquiry we heard evidence suggesting that there are a significant number of cases where homebuyers may have been deliberately mis-led about the terms they were signing up to. If the sale of leasehold house has taken place with the homebuyer under the impression that they were buying it freehold, or “equivalent to freehold” as many were told, then action needs to be taken. Equally, if a homebuyer is told they will be able to buy the freehold in a couple of years, only to find out it has been sold on to another company, then this should be investigated.

“I am pleased that the Competitions & Markets Authority has taken positive action to understand the scale of mis-selling and onerous leasehold terms. Homebuyers need to be protected and, where evidence of mis-selling is proved it is right that the CMA take action.”

LEASE’s Chair, Wanda Goldwag, said:

“We welcome the CMA’s investigation into whether the selling of leasehold property has not been working in the best interests of consumers; and we are happy to help the CMA with its investigation. We look forward to sharing the data we recently published on all the issues with service charges, lease extension and freehold purchase that our staff have handled over the last 5 years”

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