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.
And again:
“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:
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This Competition & Markets Authority (CMA) arose from the ashes of the useless Office of Fair Trading (OFT) that was closed (in my opinion) as Not Fit For Purpose. The CMA replaced the useless QUANGO OFT that spent 4 years investigating Peverel Retirement (now Firstport Retirement) into the million pound Price Fixing Fiasco. This Fiasco cost us, taxpayers, £500,000 and led to no convictions or imprisonments for those guilty of Price Fixing and Tender Rigging including setting up a Cartel, Peverel owned up in 2009 to the charges yet it took 46 months before they completed their report.
Thanks to the likes of LKP and Clive Betts MP and other supporters who see it as it is.
Further to the above CMA and the OFT, this was from a report by the CMA over Exit Fees.
The OFT investigation Between 2009 and 2013 the Office of Fair Trading (OFT), carried out an investigation into event fees. The OFT closed on 1 April 2014 and its responsibilities passed to a number of different organizations, including the Competition and Markets Authority (CMA) and the Financial Conduct Authority. Overall, the OFT concluded that “transfer fee terms, as typically currently drafted, are likely to constitute unfair terms under the UTCCRs [Unfair Terms in Consumer Contracts Regulations].” However, the OFT decided not to test this proposition in the courts as a number of companies voluntarily agreed to drop event fees and make changes to enforcement practices.
The OFT did recommend some further policy and legislative change?
The OFT offered Peverel (now known as Firstport) immunity from fines for “turning” themselves in over a price fixing scandal involving the systemic targeting of vulnerable pensioners at a minimum of 65 developments over an amount thought to have gained Peverel £1,4,000,000.
Thus far, Firstport are believed to have returned £100,,000 as a ” gesture of goodwill”
Oddly Peverel admitted their offences only after they had been reported to the SFO and their criminal activity was reported in the Sunday Times
Two very small contractors (not their heights!) were subsequently fined, which resulted in their firms being dissolved.
Some time later it was discovered that one of the contractors was still carrying out work for Firstport.
Had the OFT acted appropriately rather than expediently Firstport would not exist today..
And even today under the new management who never deal with historical issues, the money cheated out of innocent residents sits in Firstport bank accounts.
So they acknowledge there’s a massive problem but won’t do anything because of Brexit?
That’s nuts!
Anthony, thank you for the information regarding:-
The Consumer Protection from Unfair Trading Regulations 2008
Price Fixing & Tender Rigging by FirstPort Retirement (then Peverel Retirement).
I believe the OFT chose not to take proper full investigation and action due to:-
1. Lack of funding?
2. FirstPort/Peverel had been offered Whistle Blowers Status, no charges were ever made?
3. Simply take the evidence provided by the CEO and Directors with the above Status with no real investigation required.
4. When challenged why no proper full investigation, OFT informed me they were satisfied, they had no need to look deeper, it was down to the 65 developments mentioned to take further action. The OFT Report added they were sure there had been more developments that were Price Fixed?
5. Both FirstPort/Peverel & Cirrus (now Appello) were part of Peverel Group and were subsidiary companies so no need to investigate further as they were both supposed to be cooperating with the OFT…
FirstPort/Peverel was guilty of Price Fixing & Tender Rigging, offences relating to unfair commercial practices, knowingly and recklessly that contravened the requirements of Fair Trading.
The Price Fixing & Tender Rigging materially distorted the actual costs by possibly 50% with regard to the Warden Call/Fire Systems, with the knowledge of senior management. Peverel was making on average £280,000 a year over a 5 year period from 2005/2009, £1.4,000,000 and they only offered £100,000 in compensation between 65 developments, that I believe had to sign a Non-Disclosure Order (NDO) as none of them have ever helped us to take the matter further. The OFT did say they believed there were more developments but no need to further investigate as they had done, what was expected of them?
I have a theory as to what may have occurred that led to such lenient treatment for Peverel by the OFT?
At the time of the price fixing scandal Peverel was part of the Tchenguiz Family Trust group of companies. In a very complex financial “sleight of hand” profits from Peverel found their way to the Tchenguiz Family Trust companies.
At this time Tchenguiz Family Trust companies were believed to have owned up to 1% of the UK freehold stock..
Peverel failing would have led to the Tchenguiz portfolio failing as well.
This could not be allowed to happen, because this was at the time of the banking crisis. And banks such as HBOS were very exposed by dint of their “unusual” loans granted to Tchenguiz.
Had the banks had to cope with a defaulting property portfolio as well as their well publicised issues, it is quite possible the banking rescue would not have succeeded?
So possibly a decision was made in the corridors of power to find a way not to punish Peverel?
I am watching the Parliament where Clive Betts Chair, Housing & Local Government Committee is doing a great job.
Tony, these Government Organisations are not what they should be, they are used as buffers to slow down progress in areas they choose.
I wrote to the OFT in 2014 asking for information of who out of the many Peverel Retirement Directors had phoned them to Whistleblow on their own companies “Peverel Management Services Ltd” and “Cirrus Communication Services Ltd”. Peverel and McCarthy & Stone were working together in the early 1990s and was separated due to a considered conflict of interest.
The OFT replied that “it was not in the public interest to name any directors who had been involved over the 5 years from 2005 to 2009 when the Price Fixing of 65 Retirement Developments was allowed as acceptable.
The Sunday Times outed Peverel Retirement early in 2009 before Peverel owned up to running a Cartel and Price Fixing using dummy subcontractors whose tender pricing was arranged and non-competitive. It has been stated the tendered price was up to 50% more than if it had been a true competitive tender.
The SFO was sent an email on 16/12/2009 complaining about Price Fixing. The SFO decided it was not serious enough for them to investigate. In 2010 the OFT was contacted by Peverel CEO to claim Whistleblowers status that was available if they did so before a complaint was made. The period the SFO took from the 16/12/2009 to decide allowed the OFT to deny that the complaint was not in the public arena which should have prevented Whistleblowing Status.
If Mr Brokenshire really cares about the thousands of homeowners who can not sell because of doubling ground rents, he will find another way to deliver justice for leaseholders.
Many of these leaseholders used Help to Buy and the developer’s conveyancers.
Neither the Help to Buy agencies or these lawyers flagged any issues with doubling ground rents let alone said that properties may become unsaleable
To blame Brexit is pathetic.
The Consumer Protection from Unfair Trading Regulations 2008
“Offences relating to unfair commercial practices
8.—(1) A trader is guilty of an offence if—
(a)he knowingly or recklessly engages in a commercial practice which contravenes the requirements of professional diligence under regulation 3(3)(a); and
(b)the practice materially distorts or is likely to materially distort the economic behaviour of the average consumer with regard to the product under regulation 3(3)(b).
(2) For the purposes of paragraph (1)(a) a trader who engages in a commercial practice without regard to whether the practice contravenes the requirements of professional diligence shall be deemed recklessly to engage in the practice, whether or not the trader has reason for believing that the practice might contravene those requirements.”
Yet they can investigate the merger of ASDA and Sainsburys
This letter puts forward three excuses excuses for Andrea Coscelli of the CMA having decided not to take action.
Firstly, it says that the Consumer Rights Act of 2015 cannot be applied retrospectively to situations which occurred before that act of 2015.
Secondly, it says that there are “evidential issues”, suggesting that the CMA does not put much hope in the claims of thousands of homeowners that they and their solicitors were not fully informed before “purchase”.
And then, lastly, the CMA says that they are very busy at this moment preparing for Brexit, so any considerations or actions will have to wait.
The first two excuses are unsatisfactory.
Thousands of Leasehold homes have been “purchased” since the act of 2015 and those homeowners qualify for assistance.
And with regard to the quality of evidence, surely the testimonies which the Select Committee received from hundreds of people who are trapped in the Leasehold Scam count for a great deal, particularly when those victims are unable to supply evidence that they were fully informed of what they were entering into, for the simple reason that no such information was ever supplied to them. If such information had been supplied prior to “purchase”, or even during “purchase”, then the documentation would exist. But of course it doesn’t exist because people were mis-sold their homes.