CMA Investigation

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The Competition and Markets Authority (“CMA”) launched an investigation into four of the UK’s biggest house builders, Barrett, Persimmon, Taylor Wimpey and Countryside Properties following undercovering evidence that leasehold flats and houses built by the Big Four have led to excessive fees and onerous ground rent.

A number of leaseholders who bought new flats or leasehold houses have recently found their properties to be worthless due to primarily escalating ground rent which is doubling every 10 years. Mortgage lenders refuse to lend funds for these leasehold properties making them therefore exceptionally difficult to sell and subsequently leading to a drop in their value.

The CMA launched its investigation after a number of examples in the past 5 years that concerned leasehold homeowners who may have been mislead by developers by signing up to purchase properties with ground rents that doubled every 10 years. If the CMA’s investigation shows that there has been mis-selling or unfair contract terms, enforcement action is being promised. The problem arises not only from the escalating ground rents but also from potential mis-selling of leasehold houses. Owners of leasehold houses were being mislead about the cost to purchasing the freehold of the property with prices increasing by thousands of pounds.

Another example provided by the CMA is that purchasers of properties on an estate were told that they could only purchase their property as a leasehold only to find out that neighbouring homes were later sold as freehold to other buyers.

Another practice that the CMA promises to look into is the increase of ground rent being linked to the Retail Price Index (RPI).

Whilst some freeholders and house builders are reviewing these practices and offering the leaseholders options of varying the leases so that the unfair ground rent provisions are amended, others continue to exploit this onerous system.

Here to Help

If you have a leasehold property that is either burdened by this doubling ground rent or you are interested in purchasing your freehold please contact our Property Disputes Team.

Please note the contents of this blog are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.