Court action threat over ‘mis-selling of leaseholds’

FOUR of the UK’s biggest housebuilders could risk court action if they do not commit to changing the way they do business, after the competition watchdog found evidence they had mistreated leasehold buyers.

The Competition and Markets Authority said that it has written to Barratt Developments, Countryside Properties, Persimmon Homes and Taylor Wimpey after uncovering “troubling evidence of potentially unfair terms”.

The regulator said that buyers may have been misled by developers, and been trapped into leaseholds with ground rents that double every decade.

“It is unacceptable for housing developers to mislead or take advantage of home-buyers. That’s why we’ve launched today’s enforcement action,” said CMA boss Andrea Coscelli.

A freeholder owns both the house and the land it is on, while a leaseholder basically rents the property for a fixed period – sometimes centuries.

The watchdog said it was taking action over the mis-selling of leaseholds. It said that developers had not clearly explained what ground rent is and whether it increases over time to some buyers.

When buying a leasehold, rather than a freehold, buyers often have to pay a ground rent to the person or company who owns the freehold on the site. But when potential buyers asked if they could become the freeholder, some were told that the properties on an estate were only available as leasehold homes.

Homes on the same estates were later sold as freeholds to other buyers, the CMA said.

When buying their home some new home-owners were told that it would be cheap to upgrade from a leasehold to a freehold – but this price later went up by thousands of pounds.

The CMA also said that some ground rents for leasehold sites would double every year.

Barratt said: “The group is committed to putting its customers first and will continue to co-operate with the CMA.”

Taylor Wimpey said: “Taylor Wimpey will continue to fully cooperate with the CMA, provide the further information to be requested by the CMA in the coming weeks and work with them to better understand their position.”

Persimmon said: “Any customers of a Persimmon leasehold property in the last six years has been given the right to buy their lease at below market value and many have done so.”