COMMONS

Committee welcomes CMA investigation into leasehold mis-selling

16 May 2019

The Housing, Communities and Local Government Committee has welcomed the commitment by the Competition & Markets Authority (CMA) to investigate the mis-selling of leasehold properties.

The investigation by the CMA will examine the extent of mis-selling, and was detailed in a letter sent to the committee.

The CMA has also said that it will examine whether the most onerous leasehold terms, such as permission fees and doubling ground rents, might constitute ‘unfair terms’ as legally defined. These investigations may, in due course, lead to the CMA bringing enforcement proceedings against the developers and freeholders responsible.

Chair's comments

Chair of the Committee, Clive Betts MP, had written to the CMA urging an investigation following evidence heard over the course of its inquiry into leasehold reform.

Committee Chair, Clive Betts MP commented:

“The Housing, Communities and Local Government Committee report into leasehold laid bare a system in urgent need of reform, where homebuyers are vulnerable to exploitation by freeholders, developers and managing agents. Worse still, we heard extensive evidence from leaseholders regarding onerous ground rent terms, high and opaque service charges and one-off bills, unfair and excessive permission charges, and unreasonable costs to enfranchise or extend leases.

“Over the course of the inquiry we heard evidence suggesting that there are a significant number of cases where homebuyers may have been deliberately mis-led about the terms they were signing up to. If the sale of leasehold house has taken place with the homebuyer under the impression that they were buying it freehold, or “equivalent to freehold” as many were told, then action needs to be taken. Equally, if a homebuyer is told they will be able to buy the freehold in a couple of years, only to find out it has been sold on to another company, then this should be investigated.

“I am pleased that the Competitions & Markets Authority has taken positive action to understand the scale of mis-selling and onerous leasehold terms. Homebuyers need to be protected and, where evidence of mis-selling is proved it is right that the CMA take action.” 

Further information

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