Major housebuilders under investigation over leaseholds

new building being built

The Competition and Markets Authority (CMA) has announced that it is investigating four of the UK’s largest housebuilders, following what it described as ‘troubling evidence’ over their methods of selling leasehold properties. Other, as yet unnamed, housebuilders are also being encouraged to review their practices.

Buyers of homes built by Persimmon Homes, Taylor Wimpey, Barratt Developments and Countryside Properties have described how they have become embroiled in a leasehold trap. The homeowners claim they have been misled and become unwittingly caught in an upward spiral of rising ground rents and unfair fees.

Enforcement notices have been served on the four housing developers, who have been asked by the CMA to review their policies and provide detailed information regarding their methods of operation. The CMA is also investigating those firms that have purchased the freeholds from these developers, where the firms had continued to use the same unfair contract terms.

The CMA is concerned about the potential unfairness of leasehold contract terms and instances of mis-selling, including:

  • Housebuilders’ failure to inform some homebuyers that the homes could be purchased freehold and the additional cost of buying freehold retrospectively was not explained;
  • Ground rent had not been explained or included onerous clauses within the contracts such as, in some cases, ground rent charges doubling every ten years;
  • The use of high pressure sales tactics, including the setting of short deadlines.

The CMA investigation supports the government’s aim of preventing new build homes from being sold leasehold, as well as removing the ground rents charged on new leases. The Housing Minister, Robert Jenrick, described such practices as “shameful” and said they had “no place in our housing market”.

Those affected by the misleading practices will be relieved that the enquiry is finally taking place. According to one recent report, as many as 62% of leasehold property owners believed they had been mis-sold their leasehold and 93% said they would not buy another leasehold property in the future.

The National Association of Estate Agents has welcomed the investigation, describing leaseholders as becoming “trapped in confusing contracts with their freeholders”.

Once the enquiry’s evidence has been reviewed, legal action could be taken against the four housebuilders.

Thinking of buying leasehold property? See the CMA’s written and video guidance first.