The Competition and Markets Authority (CMA) it will examine the controversy surrounding new build homes sold on leases subject to substantial increases in ground rent and ‘permission fees’ for home improvements. Developers and freeholders could face action if the watchdog finds evidence of ‘unfair terms’, a breach of consumer contract law.
Housing Secretary, James Brokenshire, previously called on the CMA to use its influence to tackle the "culture of consumer exploitation rife in the housing industry" with an inquiry into the estimated 100,000 homes sold with "extortionate" leases. However, in November the CMA told him it would not investigate the issue. The U-turn comes after the Commons Housing Committee published a report in March calling for the law to be changed to help people stuck in leasehold properties they are unable to sell on. It also criticised solicitors for failing to warn clients, accusing some of being too close to developers. More than 40 property developers and freeholders this year signed a government-backed pledge to help homeowners affected by the scandal.
A spokesperson for the Home Builders Federation (HBF) said: “We welcome the CMA investigation that should accurately set out the wider issues around leasehold and so help dispel some of the incorrect claims made. The industry has made huge progress to identify and address the issues raised on particular aspects of leasehold sales. Leasehold remains a safe and secure tenure for millions of people for which no viable or realistic alternative currently exists.”