Major housebuilders accused of misleading leasehold buyers

Housebuilding

The competition watchdog has accused four of the UK's major housebuilders of misleading leasehold buyers and of potential mis-selling in the housing market.

The Competition and Markets Authority has written to Barratt Developments, Countryside Properties, Persimmon and Taylor Wimpey after finding "troubling evidence of potentially unfair terms".

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

It added that developers had not clearly explained what ground rent was to some buyers and whether it increased over time.

Andrea Coscelli, the CMA's chief executive, 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 is also probing the potential use of unfair sales tactics, including unnecessarily short deadlines to complete purchases.

Anna Bailey, chief executive of advice firm the Leasehold Solutions Group, said: "There has never been any justification for selling new houses as leasehold, it has simply been a way for housebuilders to enhance their profits at the expense of buyers.

“We have always said that the only way to address the practice was by positive action, so we are delighted that the CMA is finally showing its teeth."

Some industry sources questioned why only four companies were targeted, with smaller landowners and other companies not named allegedly engaged in similar practices.

Tim Reid, Senior Associate at Hogan Lovells said: "A move by the CMA had been in the pipeline, but there has been a lot of talk in government about so-called abuses of the leasehold regime. One of the main targets has been ground rents, especially cases where they increase exponentially as seen here.

"This has been a particularly sensitive area from CMA - leasehold and ground rents have been embedded into UK property culture for centuries."

The CMA said that it would take the companies to court if needed, but legal commitments from the companies to change the way they do business may be sufficient.

Barratt, Taylor Wimpey, Countryside and Persimmon all affirmed their commitment to co-operate fully with the CMA.