Leasehold property buyers 'misled by developers'

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An investigation into the leasehold property market has found “worrying evidence” that buyers are being treated unfairly and charged unreasonable fees.

The Competition and Markets Authority (CMA) said many homeowners found themselves in “serious traps” after being misled by housing developers.

It said it would take action against firms, calling for a change in the law and for refunds to be paid.

But it has not disclosed any names so far as it continues to investigate.

The CMA found some buyers were not told upfront that a property was leasehold and what this meant.

By the time people found out the realities of owning a leasehold, including regular ground rent charges, they were often unable to pull out of the sale, or would have found it very difficult.

In some cases, ground rents doubled every 10 years. This increase is often built into contracts, meaning people can struggle to sell their homes and find themselves trapped.

George Lusty from the CMA told BBC Radio 5 live that people could be in line for refunds.

“If we can attack and challenge these unfair ground rent terms, then they’re invalid – all the money that was collected on them isn’t valid and that has to be paid back,” he said.

“We’re going to do everything we can to get people out of these really serious traps they find themselves in.

“People aren’t able to take mortgages on these properties. They can’t sell them, that’s a terrible outcome and absolutely devastating for the people affected.”

This could result in firms signing legal commitments to change how they do business, and being taken to court if they do not comply.

The CMA said there should be a ban on the sale of new leasehold houses, while ground rents for new leases should be slashed to zero.

‘Deeply concerning’

Concerns have long been raised by MPs and consumer groups about unfair leasehold contracts, with costly fees or onerous terms, prompting the CMA to announce the investigation last year.

Campaigners have called for leaseholds to be abolished, while some developers say they still have a place.

A spokesperson for the Ministry of Housing, Communities and Local Government said the findings were “deeply concerning”.

“In the past two years, the government has taken more action to stop unfair leasehold practices than ever before – including reducing ground rents to a peppercorn and banning the sale of new leasehold houses.

“But we know more needs to be done to support leaseholders and the CMA report echoes our commitment to bring forward legislation to reduce ground rents to zero for future leases.”

John Healey MP, Labour’s shadow housing secretary, said: “Labour and leasehold campaigners forced this investigation last year and it confirms the scale of the problems with leasehold mis-selling.

“Ministers should legislate to stop the sale of new leasehold homes and end the unfair fees and contract terms that existing leasehold homeowners face.”