The Competition and Markets Authority (CMA) has opened enforcement action against four housing developers it believes may have contravened consumer protection law on leasehold homes.
As part of its ongoing investigation into concerns that some housing developers have treated leasehold homeowners unfairly and misled prospective buyers, the CMA launched enforcement cases on 4 September 2020, focusing on certain practices of:
- Barratt Developments.
- Countryside Properties.
- Persimmon Homes.
- Taylor Wimpey.
This action follows the CMA uncovering evidence of potentially unfair terms concerning ground rents and potential mis-selling. We reported on the 'ground rent scandal' here explaining that the long lease could, because of the level of the ground rent, be or through increases become an Assured tenancy, notwithstanding the duration of its term and the payment of a premium on its grant.
If the ground rent is over £1,000 per annum in London or over £250 elsewhere at any time then an Assured tenancy will be created.
The CMA will also be investigating certain firms who bought freeholds from these developers and have continued to use the same unfair lease terms.
The CMA has written to the four developers, outlining its concerns and seeking information. At this stage, it should not be assumed that the developers under investigation have been involved in the outlined practices. How the case proceeds depends on the assessment of the evidence. Possible outcomes include legal commitments from the companies to change the way they do business, or if necessary, the CMA may take them to court.
Alongside its enforcement action, the CMA is also writing to several other developers, encouraging them to review their practices to make sure they are treating consumers fairly and complying with the law.
The use of unfair contract terms that mean homeowners have to pay escalating ground rents, which in some cases can double every 10 years. This increase is built into contracts, meaning people can also struggle to sell their homes and find themselves trapped.