CMA launches enforcement action against four homebuilders

The Competition and Markets Authority (CMA) is taking action against four housing developers over leasehold selling.

As part of its ongoing investigation into the residential leasehold housing sector, the competition watchdog has opened enforcement cases focusing on certain practices of Barratt Developments, Countryside Properties, Persimmon Homes and Taylor Wimpey.

The CMA said that it had found 'troubling evidence of potentially unfair terms concerning ground rents in leasehold contracts and potential mis-selling'. It is concerned that leasehold homeowners may have been unfairly treated and that buyers may have been misled by developers.

For example, some homeowners have seen their ground rent doubling every 10 years. This increase is built into contracts, meaning that people can also struggle to sell their homes and find themselves trapped.

Some developers may have failed to explain clearly exactly what ground rent is, whether it increases over time, when increases will occur and by how much. And some buyers may have been misled about the cost of converting their leasehold to freehold ownership.

Additionally, the CMA will be looking further into ground rent increases based on the Retail Price Index (RPI) and said it may take enforcement action should it find evidence of unfair practices. In particular, the watchdog is concerned about the fairness of escalating ground rent terms linked to RPI and that these are not always effectively explained by developers when discussing RPI-based ground rent with prospective homeowners.

The CMA will also be investigating certain firms that bought freeholds from these developers and have continued to use the same unfair leasehold contract terms.

Possible outcomes include legal commitments from the companies to change the way they do business or, if necessary, the CMA could take firms to court.

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