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TODAY'S OTHER NEWS

CMA launches investigation into sale of leasehold properties

The Competition and Markets Authority has formally launched an investigation into the sale of leasehold properties - including possible mis-selling.

This follows major controversies surrounding the fairness, clarity and presentation of some leasehold contract terms, which critics have said could lead to people being stung by costly fees over a long period or having to abide by onerous terms.

The CMA’s consumer protection law investigation - which has been expected by the industry - will examine two key areas:

- Potential mis-selling: whether people who have bought a leasehold property are given the information they need to fully understand the obligations they are taking on, for example the requirement to pay ground rent over a certain period of time, or whether they have an accurate understanding of their ability to buy their freehold; and

Potential unfair terms: whether people are having to pay excessive fees due to unfair contract terms. This will include administration, service, and ‘permission’ charges – where homeowners must pay freeholders and managing agents before making home improvements – and ground rents, which in some cases can double every 10 years.

The CMA is writing to companies across the sector – including developers, lenders and freeholders – requiring information to understand more about how leaseholds are sold and managed, and the terms their contracts contain. 

It also wants to understand the impact such practices have on homeowners, and so is calling on people to share experiences that could be relevant to its work.

If the authority thinks that a company’s practices are misleading – or that its contracts contain unfair clauses – it could take enforcement action to require the company to change how they operate.

In recent weeks a report from the National Association of Estate Agents revealed that 62 per cent of leasehold property owners felt they had been mis-sold and 93 per cent said they wouldn’t buy another leasehold property.

George Lusty, the CMA’s senior director for consumer enforcement, says: “Buying a home is one of the most expensive and important purchases a person can make. So it’s essential they fully understand the contract they are signing – including whether they will have to pay more than they bargained for. 

“Our investigation will shed light on potential misleading practices and unfair terms to help better protect people buying a home in future.”

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    Surely the buyers protection leasehold or otherwise comes largely from the conveyancing process during which the purchasers lawyer advises and reports on the rights and obligations which the purchasers will have committed themselves to upon exchange of contracts - I find it odd that buyers can claim they have been miss -sold a leasehold property if they have not bothered to read their lawyers report on the lease. If it transpires that there are onerous terms and conditions of the Lease which their lawyer failed to advise on, then that is where they should rightly seek redress. I have lost count the number of times in my long career in the residential property market that the powers that be have raised the issue of Leasehold reform but failed to follow through with an equitable replacement, but instead have just tinkered around the edges.

  • Simon Shinerock

    The trouble is most people are not generally equipped to assess the downside of an onerous contract and Solocitors don’t really help. People see a property and wrongly assume the contract must be fair even when it isnt. I see this as a practice that takes advantage of the public’s naivety in an extreme way and does need adjustment

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    And they were encouraged to use the developers solicitors.

  • David Bennett

    Long overdue and this will be the next PPI scandal. How many buyers of new homes have been persuaded to use the developer's conveyancer, included with with carpets and kitchen units. Clear case of Conflict of Interest and hardly impartial, legal advice. I just feel for the thousands of home buyers, who find they need the Freeholder's permission, at a cost of £10,00, just to add a conservatory. Shame on Persimmon et all.

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    “The CMA is writing to companies across the sector – including developers, lenders and freeholders – requiring information to understand more about how leaseholds are sold and managed, and the terms their contracts contain”. Interesting it’s almost as if they believe that developers and freeholders write their own leases! This witch hunt should be directed at solicitors who write the leases and then advise buyers and lenders on the same leases. Seems like the CMA are barking up the wrong tree on this one!

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