CMA launches action against housebuilders

The Competition and Markets Authority (CMA) has launched enforcement action against Barratt Developments, Countryside, Persimmon and Taylor Wimpey relating to leasehold contracts and “potential mis-selling”.

The CMA said it was bringing action, having “uncovered troubling evidence of potentially unfair terms concerning ground rents in leasehold contracts and potential mis-selling”. It stated it was concerned that leasehold home owners may have been “unfairly treated and that buyers may have been misled by developers”.

The four large housebuilders have been approached for:

• Mis-selling – including developers “failing to explain clearly exactly what ground rent is, whether it increases over time, when increases will occur and by how much”; people being misled about the availability of freehold properties and the cost of converting leasehold to freehold ownership, the CMA said.

The CMA is also concentrating on unfair sales tactics, such as “unnecessarily short deadlines to complete purchases” to secure a deal, with buyers being rushed into buying properties they may not have purchased, given more time.

• Unfair contract terms on ground rents – Contract terms that see home owners paying “escalating ground rents, which in some cases can double every ten years”. With this increase built into contracts, the CMA said people could struggle to sell their homes.

The CMA also said it would be probing further into ground rent increases based on the Retail Price Index (RPI) “and may take enforcement action should it find evidence of unfair practices in relation to these”.

It has now written to the housebuilders outlining its concerns and asking for information.

In response, Barratt said: “Barratt Developments notes the announcement made by the UK Competition and Markets Authority that it is opening an enforcement case as part of its ongoing investigation in relation to the sale of leasehold homes. The group is committed to putting its customers first and will continue to co-operate with the CMA whilst it completes its investigation.”

Taylor Wimpey said: “We note the announcement from the Competition & Markets Authority (CMA) that they are opening an enforcement case against Taylor Wimpey and other leading housing developers in connection with the sale of leasehold homes and potential breaches of consumer protection laws."

“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."

Countryside commented: “The board of Countryside notes today's statement from the Competition & Markets Authority (CMA). 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 was also approached for comment.

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