Watchdog threatens to take builders to court over potential mis-selling

Four of the country’s biggest housebuilders could risk court action if they do not commit to changing the way they do business, after the competition watchdog found evidence they had mistreated leasehold buyers.

The Competition and Markets Authority said it has written to Barratt Developments, Countryside Properties, Persimmon Homes and Taylor Wimpey about the practices.

The Competition and Markets Authority said that it has written to Barratt Developments, Countryside Properties, Persimmon Homes and Taylor Wimpey after uncovering “troubling evidence of potentially unfair terms”.

It warned that some leasehold buyers were being hit with ground rents that doubled every decade, and said that others were wrongly told that they were unable to buy the freehold on a site.

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CMA chief executive Andrea Coscelli 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.”

The CMA’s action relates to a number of areas of concern, including allegations that : developers had failed to explain clearly exactly what ground rent is, whether it increases over time, when increases will occur and by how much.

The CMA is also concerned about people being misled about the availability of freehold properties.

For example, the CMA found evidence that some people were told properties on an estate would only be sold as leasehold homes, when they were in fact later sold as freeholds to other buyers.

The watchdog also uncovered evidence of people being misled about the cost of converting their leasehold to freehold ownership.

A freeholder owns both the house and the land it is on, while a leaseholder basically rents the property for a fixed period – sometimes centuries.

When buying their home, the CMA found evidence that some people were told the freehold would cost only a small sum, but later the price had increased by thousands of pounds with little to no warning.

The watchdog is also investigating allegations surrounding the use of unfair sales tactics – such as unnecessarily short deadlines to complete purchases – to secure a deal, meaning people could feel pressured and rushed into buying properties that they may not have purchased had they been given more time.

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 produced written and video guidance, which offers advice on a number of issues, including what people can do when faced with fees and charges they consider unjustified.

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.

The CMA said that it would take the companies to court if needed, but they may be able to make the charges go away if they legally commit to change the way they do business.

Barratt said: “The group is committed to putting its customers first and will continue to cooperate with the CMA whilst it completes its investigation."

Taylor Wimpey said: “The board takes this very seriously and Taylor Wimpey will continue to fully cooperate with the CMA, provide the further information to be requested by the CMA in the coming weeks and work with them to better understand their position.”

Persimmon said: “A proportion of our properties were sold on a leasehold basis in the past.

“Following consultation with government, stakeholders and customers we took the decision to stop selling leasehold houses where Persimmon owns the land freehold in 2017.

“Any customers of a Persimmon leasehold property in the last six years have been given the right to buy their lease at below market value and many have done so.”