Competition and Markets Authority derails the government’s cosy love-in with developers – easier planning; ‘Build! Build! Build!; 2 storeys dumped on flats …
The UK’s biggest housebuilders could be forced to pay up to £1bn in compensation to buyers due to a mis-selling scandal that is being investigated by the competition watchdog.
The Competition and Markets Authority is taking enforcement action against Taylor Wimpey, Countryside Properties plc, Barratt and Persimmon for dumping their customers in unsellable doubling ground rent homes.
The CMA is concerned that they were “failing to explain clearly exactly what ground rent is, whether it increases over time, when increases will occur and by how much”.
The CMA sounds a welcome discordant note after months of the government obliging this unreformed and largely unscrutinised sector with easier planning, yet more public subsidy via Help To Buy and a credulous chant of “Build! Build! Build!”.
The UK competition regulator has deepened its investigation into four of the country’s biggest housebuilders over their treatment of leaseholders. The Competition and Markets Authority said on Friday it had “uncovered troubling evidence of potentially unfair terms concerning ground rents in leasehold contracts and potential mis-selling”.
In addition, the CMA raised these points:
“Availability of freehold: people being misled about the availability of freehold properties. For example, the CMA found evidence that some people were told properties on an estate would only be sold as leasehold homes, when they were in fact later sold as freeholds to other buyers.
“Cost of the freehold: people being misled about the cost of converting their leasehold to freehold ownership. When buying their home, the CMA found evidence that some people were told the freehold would cost only a small sum, but later down the line the price had increased by thousands of pounds with little to no warning.
“Unfair sales tactics: developers using unfair sales tactics – such as unnecessarily short deadlines to complete purchases – to secure a deal, meaning people could feel pressured and rushed into buying properties that they may not have purchased had they been given more time.”
The action by the CMA vindicates the actions of LKP, which brought this mis-selling scandal to government attention in 2015 and raised in nationally in October 2016. It became a major parliamentary and media issue from 2017, with government repeatedly promising over three years to set new ground rents to zero and to ban leasehold houses – neither of which have occurred.
The CMA conclusion means that house builders need to broker a deal with their former customers or face court action, which may be as soon as next year.
For some reason, the CMA excluded Redrow – even though it sold properties with doubling ground rents – and Bellway, which is no stranger to playing the leasehold game to its customers’ disadvantage, as the Communities Select Committee was told:
In spite of considerable lobbying from house builders and the investors in ground rents – overwhelmingly private equity with hidden beneficial ownership and often based offshore – both the CMA and the Law Commission have launched detailed investigations which have found fault with the leasehold system.
The only outfit not to have acted is the government itself.
However, Communities Secretary Robert Jenrick did tweet this today:
LKP’s comment to media is:
“For years we were saying that plc house builders were ripping off their own customers with predatory ground rents and other games with leasehold tenure, and now the Competition and Markets Authority agrees with us and is taking enforcement action.
“What about the people who bought these flawed homes and now cannot sell them, or they are worth markedly less than what they paid for them?
“This was abusive corporate behaviour on a massive scale, and it is utterly shameful that professionals recommended by the plc house builders – solicitors and valuers – went along with it.
“As well as their customers, the plc house builders ripped off the rest of us as many of these blighted homes were bought with Help To Buy subsidies, and taxpayers are unlikely to get that money back.
“It is awful that these monopolising companies are poised to get further public subsidy from our ever-credulous government over its ambitious house building plans.”
Four of Britain’s biggest housebuilders face enforcement by the competition watchdog for the potential mis-selling of leasehold homes. The Competitions and Markets Authority (CMA) has opened cases involving Barratt, Persimmon, Taylor Wimpey and Countryside Properties after finding “troubling evidence” that customers may have been misled into buying leasehold homes with onerous or unfair terms. No decisions have been made, but the investigation could open the way for refunds to affected buyers if the watchdog orders the companies to change their business practices.
The CMA announcement this morning is here:
As part of its ongoing investigation, the Competition and Markets Authority (CMA) is today opening enforcement cases focusing on certain practices of: Barratt Developments Countryside Properties Persimmon Homes Taylor Wimpey The move comes after the CMA uncovered troubling evidence of potentially unfair terms concerning ground rents in leasehold contracts and potential mis-selling.
As if housebuilders hadn’t nailed enough goodies already: profits underwritten by Help to Buy; banks doling out 95 per cent loan-to-value mortgages; a housing shortage boosting demand. The stuff that delivered former Persimmon boss Jeff Fairburn his £75 million bonus, despite his expertise in half-built homes.
The leasehold house ownership system should be abolished and not fixed, campaigners have said as one MP likened it to the PPI scandal. The National Leasehold Campaign (NLC) said it hoped a warning to builders from the competition watchdog on Friday would “shame these developers and investors into action”.
The competition watchdog is investigating four of the UK’s biggest housebuilders after uncovering evidence that buyers of leasehold properties were misled and charged excessive fees. Barratt, Persimmon, Taylor Wimpey and Countryside Properties all face action after the Competition and Markets Authority found “troubling evidence” of unfair practices.
The UK competition watchdog has opened enforcement action against four of the country’s largest housebuilders, including Barratt Developments and Persimmon Homes, for allegedly ripping off leaseholders in a potential mis-selling scandal. The Competition and Markets Authority escalated its year-long investigation into the sale of new-build properties using leaseholds by naming Barratt, Countryside Properties, Taylor Wimpey and Persimmon as targets in its probe.