Competition watchdog launches official probe into suspected ‘mis-selling’ of leasehold homes

The competition watchdog is opening an investigation into potential breaches of consumer protection law in the leasehold market.

The Competition and Markets Authority says it is concerned about possible mis-selling and whether people are being ‘stung’ by costly fees over a long period of time.

It is particularly concerned about whether leasehold contracts are onerous and unfair in relation to ground rent, service charges, and permission fees.

While it is clear that it is developers and their products under the spotlight, there is no indication that the probe will limit itself to new homes. A spokesperson for the CMA said that the range of the investigation will be decided on the evidence that comes in.

 Mark Hayward, CEO of the NAEA, said: “We welcome the investigation by the CMA into the leasehold market. For too long, house builders and developers have not been transparent enough about what it actually means to buy a leasehold property, which has led to three in five (62%) feeling like they were mis-sold.

“Buying a property is a huge undertaking and it should be an exciting time, but for thousands of home owners it’s led to financial difficulty as they’ve become trapped in confusing contracts with freeholders.

“It’s encouraging to hear the CMA will take enforcement action against any company found to be misleading consumers.”

The investigation will focus on two key areas:

  • Potential mis-selling: whether people who have bought a leasehold property are given the information they need to fully understand the obligations they are taking on, for example the requirement to pay ground rent over a certain period of time, or whether they have an accurate understanding of their ability to buy their freehold.
  • Potential unfair terms: whether people are having to pay excessive fees due to unfair contract terms. This will include administration, service, and ‘permission’ charges – where home owners must pay freeholders and managing agents before making home improvements – and ground rents, which in some cases can double every ten years.

The CMA is writing to companies across the sector, including developers, and is calling on people to share their experiences.

If the CMA thinks that a company’s practices are misleading – or that its contracts contain unfair clauses – it could take enforcement action to require the company to change how they operate.

George Lusty, senior director for consumer enforcement at the CMA, said: “Buying a home is one of the most expensive and important purchases a person can make. So, it’s essential they fully understand the contract they are signing – including whether they will have to pay more than they bargained for.

“Our investigation will shed light on potential misleading practices and unfair terms to help better protect people buying a home in future.”

Initial responses are invited by July 12.

Five email addresses are given where evidence may be sent, suggesting the initial scope of the investigation.

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  1. Country Boy

    My apologies to every highly intelligent person involved in this extremely simple matter.

    The last person the buyer has to both explain to.him what he is buying and to give him advice as to whether to purchase or not is HIS SOLICITOR.

    SOLICITORS FAILED their Clients badly when they purchased these properties UNLESS each SOLICITOR advised his Client not to.purcbase in which case the buyers have only themselves to blame for purchasing.


    1. ArthurHouse02

      I agree with this completely. As always the CMA will dig around in the wrong place and together with government decide that estate agents are to blame probably. The leasehold review already conducted by the government saw fit to state that developers can get their own house in order.

      Solicitors are the people employed by the buyer to check all these matters stated by the CMA, if downsides were not highlighted by that person then surely a buyer has recourse? If not what is the point?

  2. aSalesAgent

    The problem is most people (first-time buyers and elderly downsizers in particular) are not equipped to assess the downside of a lease. People see a property and wrongly assume the lease is fair if everyone else is signing up for one. Leases written over 120 years ago can be incredibly difficult to follow too.
    I feel this investigation is long overdue. Fingers crossed we see many of the historic clauses we have come to accept, such Freeholder’s consent to sublet (Airbnb, etc), done away with.

  3. WiltsAgent

    This will be the same as PPI was for the banks, it will rumble on for years and will cost the house builders that involved themselves in it millions. As PPI finishes the same claims companies will jump on this. There was never any justification in selling houses as leasehold other than to make extra profits so as to pay millions to their directors and shareholders. Subjecting purchasers of new houses to feudal lease agreements and ensuring your ‘recommended lawyer’ acted on their behalf will eventually be revealed for what it is.

  4. Rob Hailstone

    Many clients do not read, or even pay heed to what their solicitor/conveyancer tells or advises them. What advice has been provided should be well documented and each shoud case be looked at individually and on its own merits.

  5. TwitterSalisPropNews

    It is SHOCKING that a buyer of leasehold can get as far as a conveyancer without any literature/warnings etc – to quote another article on this website posted today – – maybe 8 weeks short of 6 months from browsing to buying.

    Why on earth can a buyer get so far along the process?

    1. Nothing imposed on estate agents or new home Developers by the Government when listing a leasehold Massive Government fail!

    2. Nothing self-imposed by estate agents when listing leasehold

    3. Nothing imposed by or on Rightmove/Zoopla when listing a leasehold

    4. Nothing by a mortgage adviser

    5. Nothing by a surveyor

    6. Nothing by the mortgage company

    7. NOW….the conveyancer steps in……..AND people look to blame them!?
    Roll on competition watchdog.


    1. ArthurHouse02

      As estate agents, firstly we are paid to act for the vendor, but whilst doing so it is our job to provide accurate information to anyone considering buying any property. We are not legal experts and are also not representing a potential purchaser, we cannot provide them with advice on whether they should proceed or not.

      That is for the legal expert to advise, no one else.

    2. PeeBee


      “It is SHOCKING that a buyer of leasehold can get as far as a conveyancer without any literature/warnings etc…  Why on earth can a buyer get so far along the process?”

      Other relative questions:

      Why does a dingo lick its’ danglies?  A.  Because it can.

      I know I shouldn’t have to – but I feel that I need to clarify here a few not-insignificant points, such as that:

      1.  The Lease that is being debated here has been drawn up by professional Legal advisers as to be both compliant and universally acceptable as a tenure to the parties involved in the buying process.

      2.  They are generally pre-approved by lenders’ Legal Departments.

      3.  Buyers employ qualified, competent solicitors/conveyancers as their own Legal Advisers.  These Legal Advisers have a duty of care to both their client and also to the Lender – thereby doubling the Lender’s security in this respect.

      4.  Leaseholds have been in existence – and have been a perfectly acceptable form of tenure for property purchase – for centuries.

      5.  Up to the 1990s Leases changed very little apart from yearly ground rents increasing to take into account inflation etc – with the exception that a peppercorn is still, after all those years, a peppercorn.

      6.  Builders rarely saw benefit from collecting Leasehold ground rents – the monies received was often at best equal to the costs of collection.  When people like Gerald Hitman started buying Freeholds en masse from the builders in the mid 80s they initially saw it as a weight off their shoulders – only too late did they see the future worth that Hitman peddled on for a handsome profit on his investment.  And in hindsight Hitman should have held on to them as the hefty short-term gain he made pales into insignificance less than 35 years later – a Freehold sold on to one of the companies hoovering them up in 1986 has increased in value 20 or 30 fold.

      7.  People buying a property with a 99-year Lease should have nothing to worry about.  Nor should they on one with 60 or more years unexpired.  Lenders have become more and more risk-averse, and term of unexpired Lease is an easy thing to blame for refusal to lend – thereby allowing the ‘value’ of a Lease to escalate disproportionately.

      8.  Failure by the Government to restrict Freeholders demands for unreasonable costs for Lease extension or or purchase of the freehold interest of a property further exacerbated the problem.

      9.  Failure to restrict freeholders manipulation of Lease terms and conditions – although perfectly ‘legal’ – has created the perfect storm.

      10.  Freeholders have been allowed to now maximise on their Freehold interest from the outset rather than having to wait for years passing to hike the value of the Leasehold interest.

      11.  CMA are entirely the wrong people to deal with this.  A Freeholder can ask what they want for their interest – they are breaking no laws by doing so.  Of course they can challenge the figure and go to a tribunal – but if someone agrees to pay £10k for something worth no more than £5k then that simply sets the bar for the next buyer (and weakens the chance of winning a tribunal).

      The buyer has a choice: take it… or leave it.  It is the consequences of the latter that is the metaphorical gun to their head.


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