House giants face court over scandal of toxic leases
FOUR of the biggest housebuilders could face court over leasehold rip- offs, regulators announced yesterday.
In a major victory for the Daily Mail, the Competition and Markets Authority (CMA) launched a formal investigation into alleged mis-selling at Barratt, Countryside Properties, Persimmon and Taylor Wimpey.
It said it found ‘troubling evidence of potentially unfair terms’ and warned that buyers may have been ‘unfairly treated and misled’.
As many as 100,000 householders are thought to be stuck on ‘onerous’ leases, with some facing crippling ground rents or extortionate fees for making minor changes to their property.
The CMA said it was investigating claims that sellers used high-pressure sales tactics to rush buyers into snapping up homes. It will also examine allegations that families were misled over the cost of ground rents or purchasing the freehold.
In some cases, unfair contract terms meant ground rent doubled every ten years – trapping homeowners in homes that are almost impossible to sell, the watchdog said.
The Mail has led the way in exposing the use of rip-off leases by developers. The CMA investigation could now pave the way for such toxic contracts to be overturned. The firms will also have to provide legally binding commitments to change the way they do business, or face being taken to court.
CMA chief executive Andrea Coscelli said: ‘It is unacceptable for 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 there has been misselling or unfair contract terms, these will not be tolerated.’
Housing Secretary Robert Jenrick added: ‘Shameful practices of the kind set out by the CMA have no place in our housing market and we are going to put an end to them.
‘I strongly welcome the action to tackle mis-selling in the leasehold sector and want to see homeowners who have been affected by crippling ground rents swiftly obtain the justice and redress they deserve.’
Leaseholders effectively purchase the right to live in a property for an agreed period rather than owning it outright.
The freeholder, who owns the land, will often charge a ‘ground rent’. Anyone who falls behind
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on such charges can face repossession, making banks more cautious when they lend to leaseholders.
Yet the CMA said developers did not clearly explain ground rents to buyers and how much it can increase over time.
Around 10,000 homeowners live in a property where the ground rent doubles every decade, and many others face smaller, but significant rises, according to the watchdog’s estimates.
Government figures suggest there are 4.2 million leasehold properties in England.
Some buyers were told they could only purchase a leasehold property on a newly- built estate, only to find out their neighbours were freeholders, the CMA said.
Others were told they could buy the freehold after a couple of years, but when they tried the price had rocketed.
Gareth Shaw, head of money at Which?, said: ‘We’ve found that some leaseholders have been trapped in unsellable properties with spiralling ground rents, and even ordered to pay eye-watering retrospective permission fees under the threat of losing their home. It’s good to see the regulator taking action against some of the biggest housebuilders to protect homeowners and sending a clear message that bad practices like these must be a thing of the past.’
Barratt, Taylor Wimpey, Persimmon and Countryside all pledged to co-operate with the CMA’s investigation.
Persimmon said it stopped selling leaseholds in 2017 and has given customers the right to buy their lease at ‘below market value’. Taylor Wimpey said it takes the issue seriously and will continue to ‘fully cooperate’ with the CMA.
Countryside said it is committed to resolving the issue, while Barratt vowed to put customers first and to continue cooperating with the CMA.
MPs called for a change in the law in March last year to help families stuck in toxic leasehold deals. In a damning report, the Commons housing committee blasted solicitors for failing to warn clients about the rip- off deals and say some are too cosy with developers. It followed widespread claims that many families were victims of ‘the PPI of the housing industry’.