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Competition watchdog to launch enforcement action against developers over leasehold mis-selling

The Competition and Markets Authority (CMA) is set to launch enforcement action against developers after a probe into the leasehold industry found widespread evidence of misleading sales practices and unreasonable fees.

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Picture: Getty
Picture: Getty
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A major probe into the leasehold industry’s practices by the CMA has found that homeowners had been forced to pay escalating ground rents for their homes and had been misled about the cost of converting leaseholds into freehold ownerships. It also found that many had been given misleading information about what a leasehold property means.

The news of the upcoming enforcement action was announced today after the investigation was first launched last year.

The probe also uncovered excessive charges and disproportionate fees being set by developers for routine maintenance of shared spaces or making home improvements, while finding the ability to challenge such chargers was difficult and costly for buyers.


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Andrea Coscelli, chief executive of the CMA, said: “We have found worrying evidence that people who buy leasehold properties are being misled and taken advantage of.

“Buying a home is one of the most important and expensive investments you can make, and once you’re living there you want to feel secure and happy. But for thousands of leasehold homeowners this is not the case.
“We’ll be looking carefully at the problems we’ve found, which include escalating ground rents and misleading information, and will be taking our own enforcement action directly in the sector shortly.”

The CMA initially launched the investigation into the leasehold market in June last year with an aim to investigate whether the public had been fairly treated when it came to building a home.

The probe followed widespread concerns over the fairness, clarity and presentation of contract terms on leasehold properties.
The CMA is now preparing to launch direct enforcement action against companies it believes have broken consumer protection law. This could result in firms signing legal commitments to change how they do business. If they fail to make the required changes, the CMA could take action through the courts to make them comply with the law.

The government initially announced plans to ban the practice of selling leases on new build homes in July 2017. MPs have also called for a new code of practice covering housing associations and councils following the revelations that thousands of new homeowners had signed up to extortionate leasehold fees.

A report published last year by the Housing, Communities and Local Government Committee called for wide-ranging reforms to the leasehold system amid concerns that homeowners are being badly treated across both the private and public sectors.

The report included calls for the creation of a code of practice for social housing landlords, which would contain guidance on best practice for carrying out and charging major works on leasehold homes.

The CMA said it 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.

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