By 
Home buyers have been duped into signing up to expensive and unfair leasehold contracts by unscrupulous housing developers, a major investigation into the industry has found.
The Competition and Markets Authority (CMA) has been examining whether developers have mis-sold properties with expensive leasehold contracts to unsuspecting buyers.
It follows an outcry over the sale of new-build leasehold homes to customers who did not realise they could be locked into paying huge ground rents and find the properties impossible to sell.
The CMA found evidence that some developers had failed to tell buyers they were purchasing a home on a leasehold basis.
Other property firms said that there was little difference between buying a leasehold property and a freehold one, even though the former ties homeowners into onerous contracts and can cause numerous legal difficulties.
With a freehold property, the buyer owns the land on which the property sits, as well as the bricks and mortar. For leasehold contracts the land is owned by a third party which charges ground rent to the homeowners each year.
In come cases developers only made this clear to customers shortly before a final deal was agreed, meaning it was hugely expensive for buyers to change their mind.
There was also evidence that developers had misled customers by stating that they could later purchase the freehold for a small sum.
By the time the buyers came to do so, the cost had increased by thousands of pounds with no justification.
The CMA found that as well as failing to make clear the differences between leasehold and freehold, developers had tied customers into contracts which change “excessive and disproportionate” fees for routine maintenance.
Others faced penalties for making small changes to their property.
The level of ground rents also came under the spotlight once again. In some instances, homeowners face doubling ground rents every 10 years. This can make properties difficult to sell.
Andrea Coscelli, 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.”
The CMA said it is planning direct enforcement action against companies which it believes have broken consumer law. It will also work with the Government, which intends to ban the sale of new-build leasehold houses, to reform the rules on leasehold contracts for flats and other properties.
Money Newsletter REFERRAL (Article)
Louie Burns, a leasehold reform campaigner, said: “This is a damning report that highlights numerous leasehold abuses and we are pleased to see that the CMA is prepared to act against the developers and freeholders responsible.
“Freeholders so often claim that it is just a few isolated cases or blame the leaseholders for not reading the lease properly.
"Thanks to the CMA, we finally have an official document which lists ‘numerous complaints’ of freeholder abuses in undeniable and shaming detail.”
Jeremy Raj, of law firm Irwin Mitchell, said: “The authorities need to stop the hand-wringing that has greeted the undoubted abuses that have been perpetrated by some rogue elements within the sector, and take some decisive action to stop them.”
Comments