The Competition and Markets Authority (CMA) has announced that it will seek information from major housebuilders as part of its ongoing investigation into misinformation and fraudulent sales of leasehold properties.
The four housebuilders currently identified by the CMA are Barratt Developments, Countryside Properties, Taylor Wimpey and Persimmon Homes, and the CMA is providing information to each developer that may be challenged in court. is demanding.
Fleeceholding is now part of UK housing market culture
Preliminary estimates suggest around 100,000 people have been affected by ‘freehold’, with around 18,000 members of the National Leasehold Campaign welcoming the MCA’s action, with more evidence coming to the inquiry. Contributing.
This practice, which many fear will become more prevalent as development deregulation continues, is a practice in which major home builders deliberately hide their intentions to exploit lease agreements while discreetly The idea is to sell the lease rights to the owner.
In ideal conditions, the buyer would pay a lease on the property (usually between 99 and 125 years) and then have the opportunity to buy the freehold (perpetual ownership of the land on which the property sits) at a discount. can. .
But the reality for consumers who are now praising the CMA’s investigation is that developer representatives are putting pressure on buyers to buy quickly, making it impossible to buy freehold properties, or offering small sums of money. This means that you will be giving incorrect information by saying that the amount will be available later. , and uses that lie to exploit the new homeowner.
This “exploitation” has three elements. First, house builders sell the freehold to investment companies, which have been known to increase ground rents (paid on top of the mortgage) by up to 100% every 10 years. Second, because land ownership vests in investors, homeowners must pay exorbitant permit fees for even basic home improvements, such as repainting the front door. Ultimately, freehold owners will be happy to take advantage of this fact, knowing that homebuyers are keen to improve and personalize their homes. Third, homeowners may realize that owning the freehold of a property is likely to solve many of their problems and may consider purchasing the freehold. The problem is that, while not initially purchasing the freehold, the investment company later makes grossly exorbitant charges for the leaseholder’s right to do so, and in some cases the consumer has purchased the freehold. This means charging up to 5 times the amount you would have paid if you had done so. When they purchase a leasehold interest in a property.
According to the National Leasehold Campaign, this pattern of behavior meant that many people were unable to make improvements to their homes or had to save for long periods of time to pay the legal costs of acquiring freehold rights. That’s what it means. As a result, many people are unable to sell their homes and are forced to pay exorbitant ground rents for properties whose lease value depreciates each year, they said.
Who did this happen to?
As reported by the BBC, one example of this practice in action is Kate Kendrick, a pediatric nurse who bought her “forever home” in Cheshire six years ago.
The nurse, who currently runs the National Leasehold Campaign, was told when she bought the leasehold interest in the property that she could buy the freehold in the future for between £2,000 and £4,000. She is now being asked to pay £13,000.
Calling the CMA’s investigation a “huge step forward”, Mr Kendrick said:
“Thousands of leaseholders face continued uncertainty from the leasehold scandal and long-term financial burden. It is time for these developers to do the right thing. Their interests and executives The bonus proves they can afford to get things right.”
She added that she hoped the investigation would “shame developers and investors into action.”
Similarly, Liverpool-based builder Ian Rice told the BBC:
“We feel like we’re trapped in a leasehold. The developer hasn’t been honest with us. They told us we should hire a lawyer, but the lawyer didn’t agree to the lease agreement. They didn’t warn me about any hidden service charges.
Mr Rice said he would have to pay £20,000 plus legal costs to buy the freehold of the property because the developer had sold the freehold to a new owner, after which they would have to pay the original asking price. The price has more than doubled. This was after Mr Rice was told there was “not much point in buying freehold”.
What is the CMA going to do about it?
Andrea Coscelli, the watchdog’s chief executive, said:
“It is unacceptable for housing developers to mislead or take advantage of homebuyers.”
“Everyone involved in the sale of leasehold homes should take note. Where our investigations reveal that there have been unfair sales or unfair contract terms, these will not be tolerated.”
George Rusty, CMA’s senior director of consumer law enforcement, previously said:
“Our investigation will uncover potentially misleading practices and unfair terms to better protect future home buyers.”
The investigation examines “potential misselling” (whether buyers are accurately shown expectations and financial obligations) and “potentially unfair terms” (such as management fees, service fees, permit fees, etc.) The plan is to target those who pay unreasonable fees for contract terms. .
This follows calls from MPs on the Housing, Communities and Local Government Committee who argued that the leasehold system meant many homeowners were unable to mortgage and were therefore left with properties they could not sell. It is something.
