An industry group founded by a former property journalist says its campaign to end the mis-selling of leasehold properties has been ‘spectacularly vindicated’ by the competition regulator’s announcement that it is to launch enforcement action against several high profile house builders.
In a 31-page report, the Competition and Markets Authority (CMA) says it has found troubling evidence of potential mis-selling and unfair contract terms in the housing sector, and is set to launch enforcement action. The CMA estimates that 25% of sales since 2000 have been leasehold apartments (19%) and houses (6%) and that at least 13,000 home owners are trapped by unfair ground rent terms.
The Leasehold Knowledge Partnership (LKP), which is fronted by former Mail on Sunday editor Sebastian O’Kelly (above right), says its long campaign to highlight the dark side of new-build properties, and in particular leasehold houses, is borne out by the CMA’s damming report into the sector.
The allegations are both broad and detailed including evidence that house builders have been aggressively promoting unfair ‘doubling’ ground rents and misleading vendors about the cost of converting their homes to freehold ownership.
It is also claimed by the CMA that builders have failed to tell buyers that their home is being bought via leasehold or what that means; and been charging unreasonable fees for the maintenance of common areas and home improvements.
“We have found worrying evidence that people who buy leasehold properties are being misled and taken advantage of,” says Andrea Coscelli, the CMA’s Chief Executive.
“Buying a home is one of the most important and expensive investments you can make, and once you’re living there you want to feel secure and happy. But for thousands of leasehold homeowners, this is not the case.”
One agent’s reaction to the CMA report.
“To anyone who manages leasehold developments the findings of the CMA probe into the industry will come as no surprise whatsoever, ” says James Tarr, Head of Leasehold Managemnt at Andrews Property Group.
“The sooner the leasehold sector becomes regulated, the better. That will solve a significant percentage of the problems that are occurring almost immediately.
“You need to have a situation where conveyancing solicitors and developers alike are obliged to spell out the full meaning of leaseholds, in plain English, before any transaction takes place.
“Whenever we take on a new development we always hold a residents’ meeting and explain the basics of leasehold and why the owners need to pay a service charge.
“There’s often a huge amount of confusion as to the difference between ground rent and service charges, and in some cases residents have been told they can even opt out of these charges.