Britain’s biggest housebuilders said they will co-operate with a national investigation into whether they broke the law over potentially complicated and expensive leases on the homes they sell.
Barratt Developments, Countryside Properties, Persimmon Homes and Taylor Wimpey are being investigated by the Competition and Markets Authority which said it had found “troubling evidence of potentially unfair terms concerning ground rents in leasehold contracts and potential mis-selling”.
The CMA is working with the Government to reform the leasehold market, including supporting a ban on the sale of new leasehold houses and reducing ground rents for new leases to zero.
Barratt Developments, which is based in north west Leicestershire, said it was aware of the announcement and was “committed to putting its customers first and will continue to co-operate 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.”
And Countryside said it was “committed to resolving this issue to the satisfaction of our customers and will continue to co-operate fully with the CMA’s ongoing investigation”.
The CMA said it was concerned about:
– Housing developers failing to explain clearly exactly what ground rent is, whether it increases over time, when increases will occur and by how much.
– People being misled about the availability of freehold properties – for example by being told properties on a new housing estate would only be sold as leasehold homes, when they were in fact later sold as freeholds to other buyers.
– People being misled about the cost of converting their leasehold to freehold ownership. The CMA said it found evidence that some buyers were told the freehold would cost only a small sum, only to find out later that the price had increased by thousands of pounds with little to no warning.
– Developers using unfair sales tactics – such as unnecessarily short deadlines to complete purchases – to secure a deal, meaning people could feel pressured into buying properties that they might not otherwise have bought.
– The use of unfair contract terms that mean homeowners have to pay escalating ground rents, which in some cases can double every 10 years, leading some people to feel trapped and struggling to sell their homes.
The CMA said it will also be investigating certain firms who bought freeholds from the developers and have continued to use the same “unfair” leasehold contract terms.
It has now written to Barratt, Countryside, Persimmon, and Taylor Wimpey asking them for information.
The case could lead to demands for legal commitments from the companies to change the way they do business, or even court cases.
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.”
Alongside its enforcement action, the CMA is also contacting other developers, encouraging them to review their practices to make sure they are treating consumers fairly and complying with the law.
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