The Competition and Markets Authority agrees that leaseholders trapped by rip-off ground rents are suffering “significant detriment”, but Brexit means it cannot help.
This was the bleak message to Communities Secretary James Brokenshire last November.
“Our ability to launch new discretionary work such as this is significantly affected by the near-time preparations that we must make for EU Exit,” the Competition and Markets Authority chief executive Andrea Coscelli told Mr Brokenshire on November 26 2018.
The Competition and Markets Authority ruled against intervening in the leasehold scandal months before the Communities Select Committee recommended that it do so in its hard-hitting report published yesterday.
The committee chair Clive Betts MP is to address the Commons on its report tomorrow at 11.30am.
The LKP MP patrons, who are chairs of the All Party Parliamentary Group on leasehold reform, are asking for a meeting with the CMA.
Mr Coscelli continued:
“In the coming months, we must prioritise setting up our new State Aid function, as well as preparing for a significant increase in the number of large merger and anti-trust cases as those previously dealt with in Brussels transfer to us.
“This constraint will obviously be significantly more acute in the absence of an EU Exit deal with a transition period, in which case we would likely have to undertake this extra work immediately … [It would also] place significant constraints on the other work which we can take on if there is a ‘No Deal’ Brexit.”
There were other reasons, too, for the Competition and Markets Authority to turn down the Secretary of State’s request, even though:
“We recognise the very difficult position those consumers are in and the serious implications for those who want to sell their properties.”
One problem was that the Consumer Rights Act 2015 – “which widened the actions that an enforcer can see via commitments and in the civil courts” – only applies to breaches of law after October 1 2015.
This would exclude the majority of leaseholders trapped in new properties with doubling ground rents (around 12,000) and those where the ground rents exceed 0.1% of the sale price. Approximately 100,000 in total.
“Even with a positive outcome to a case, a result which is specific to a limited set of terms or practices and only tackles one provider may not set enough of a precedent to address all the issues across the wider market.
“There are also potential evidential issues in terms of establishing what representations were made to individual leaseholders at the time of sale, often many years ago, as well as the fact that all leaseholders are likely to have received legal advice as part of the purchasing process.”
The full letter from Mr Coscelli to James Brokenshire is given here: