The Competition and Markets Authority (CMA) has launched an enforcement action against four major UK housing developers, it has revealed.
The competition watchdog says it has decided to take enforcement action against Barratt, Persimmon, Taylor Wimpey, and Countryside Properties after an investigation found evidence of misleading practices and excessive fees.
The CMA said the developers may have broken consumer protection laws and has begun the process of taking enforcement action against them.
“It is unacceptable for housing developers to mislead or take advantage of homebuyers,” said CMA chief executive Andrea Coscelli.
“Everyone involved in selling leasehold homes should take note – if our investigation demonstrates that there has been mis-selling or unfair contract terms, these will not be tolerated.”
The CMA’s lengthy investigation found “troubling evidence” of unfair practices, including homeowners paying escalating ground rents that, in some cases, were planned to double every 10 years.
The investigation also found that people were told properties on an estate would only be sold as leasehold homes only to be sold later freehold to other buyers.
Other issues include telling leaseholders that converting to freehold ownership would be cheap, only for them to be told later it would cost thousands of pounds with no warning.
There was also evidence of unfair selling practices, such as unnecessarily short deadlines to complete purchases to pressure people into making deals.
The CMA said that, at this stage of the investigation, it should not be assumed that the developers have been involved in “any or all of the outlined practices”.
It said it would also be investigating certain unnamed firms who bought freeholds from the four developers and have continued to use the same “unfair” leasehold contract terms.
Further, the CMA said it was sending letters to a number of other unnamed developers encouraging them to review their practices and to ensure that they were treating consumers fairly and complying with the law.
Barratt Developments responded to the enforcement action by saying it was “committed to putting its customers first and will continue to cooperate with the CMA whilst it completes its investigation”.
A spokesperson for Countryside said: “We are committed to resolving this issue to the satisfaction of our customers and will continue to co-operate fully with the CMA’s ongoing investigation.”
Persimmon said: “Following consultation with government, stakeholders and customers we took the decision to stop selling leasehold houses where Persimmon owns the land freehold in 2017.
“Any customers of a Persimmon leasehold property in the last six years have been given the right to buy their lease at below market value and many have done so.
“We look forward to engaging fully with the CMA on this issue as they continue their investigation.”
Taylor Wimpey said: “The board takes this very seriously and Taylor Wimpey will continue to fully co-operate with the CMA, provide the further information to be requested by the CMA in the coming weeks and work with them to better understand their position.”
Shares in Barratt fell 3% in early trading, making it the biggest faller in the FTSE 100 index, while shares in Persimmon fell by just over 2%.
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