CMA will act on leasehold mis-selling
Bad practice in the leasehold market is old news for anyone living or working in the sector. So today?s announcement that the findings of the Competition and Markets Authority (CMA) probe into the industry will lead to ?enforcement action? is cause for optimism.
In case you missed the launch of the CMA investigation into leasehold mis-selling in June last year, here?s what the authority has been looking into:
Ground rents: homeowners having to pay escalating ground rents, which in some cases can double every 10 years. This increase is often built into contracts, meaning people can often struggle to sell their homes and find themselves trapped.
Cost of the freehold: the CMA has seen evidence that people have been misled about the cost of converting their leasehold to freehold ownership.
Misleading information: not being told upfront that a property is leasehold and what that means. By the time people find out the realities of owning a leasehold home, including the regular charges to be paid, they are often unable to pull out of the purchase, or would face significant difficulties if they tried to do so.
Unreasonable fees: being charged excessive and disproportionate fees for maintenance of shared spaces or making home improvements. Challenging such charges is often difficult and costly.
Having asked a wide range of industry stakeholders for information, the CMA found ?worrying evidence? that leaseholders are being ?misled and taken advantage of?.
So the CMA is taking action. It will launch direct enforcement proceedings against companies that flout consumer protection law. This could mean firms signing legal commitments to change how they do business and facing legal action if they don?t.
Long term, even better news is that the CMA supports the case for changes to the law that frames leasehold. Of course, legal reform takes time ? too long to help people who are already trapped in homes they can?t afford or sell due to ongoing issues around ground rent, or facing huge charges to buy their freehold.
In the meantime, the CMA is developing consumer advice for existing and potential leaseholders. This will offer tips on what they can do when faced with permission fees and service charges they consider unjustified. Leasehold is complex and involves charges that buyers don't always understand or even know about - and which are too often quickly passed over by developers and agents keen to make a sale. This has to stop. Let's hope the CMA's action helps.
Author : Mary-Anne Bowring
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