The Competition and Markets Authority (CMA) is investigating four of the UK’s largest housebuilders following “troubling evidence” in the way that leaseholds were sold.
The action concerns Barratt Developments, Countryside Properties, Persimmon Homes and Taylor Wimpey, following the sale of private newbuilds as leaseholds as opposed to the traditional freeholds. Buyers allege that the leaseholds are unfair in that the grounds rents due on the homes can escalate.
The housebuilders are all happy to work with the CMA to help ascertain the facts.
Andrea Coscelli, chief executive of the CMA, said: “It is unacceptable for housing developers to mislead or take advantage of homebuyers.
“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.”
It is believed that millions of such leasehold homes were sold across the UK. As well as annual ground rent being levied, some leases charge owners for permission to extend or make improvements to their own home.
The situation has been complicated in some instances by the leaseholds being treated as a commodity, sold on to third parties to be managed, who have then increased fees.
Housing Secretary Robert Jenrick said: “Shameful practices of the kind set out by the CMA have no place in our housing market and we are going to put an end to them.
“I want to see homeowners who have been affected by crippling ground rents swiftly obtain the justice and redress they deserve.
“Developers and freeholders must rectify the problems and ensure these disgraceful practices never happen again.”
What are the implications for self build?
Most self build homes are freehold properties, where the owner also owns the land the home is built on. But with the growth in custom build, more and more serviced plots will be delivered, and these should ideally be on a freehold basis.
However, for many community-led housing models, the homes are held by a body that ensures affordability or acts as a landowner for the group, such as with the Community Land Trust model. In this instance, these homes will be leasehold, which is perfectly acceptable as the body holds the land in trust, to secure the advantages.
Community-led housing bodies have, and continue to, lobby government to ensure that they are exempt from any new rules or laws that limit the sale of houses on leases, with Community Land Trusts now exempt.
If you are planning to build as a community, find out more about the National Community Land Trust Networks campaign on leasehold reform.