Housebuilders face CMA probe amid concerns of potential unfair ground rent terms

The competition regulator has launched a probe into some of Britain’s biggest housebuilders, after “troubling evidence” that developers had taken advantage of customers.

The Competition & Markets Authority said it was looking into practices by housebuilding giants Barratt, Countryside, Persimmon and Taylor Wimpey.

The watchdog believes the companies may have broken consumer protection law in relation to leasehold homes.

The CMA is launching enforcement action after it found evidence of unfair terms concerning ground rents in leasehold contracts and mis-selling.

Andrea Coscelli, chief executive of the CMA, said: “It is unacceptable for housing developers to mislead or take advantage of homebuyers.”

Buyers have long claimed they have suffered due to ground rents, where the leasehold owner of a property — often a flat — pays an annual fee to a freeholder, who owns the land or building on which the property stands.

But levels of ground rent vary, and in some cases have doubled every 10 years, which can make it hard for people to sell their homes.

The CMA is looking into concerns around mis-selling, including developers failing to clearly explain what ground rent is, when increases will occur and by how much.

It is also investigating people being misled about the cost of converting their leasehold to freehold ownership, and unfair sales tactics, such as some builders rushing people into decisions to secure a deal.

The CMA has written to the housebuilders outlining its concerns and requiring information, but it added that it should not be assumed at this stage of the investigation that the firms have been involved in any or all of the practices.

How the case proceeds will depend on the CMA’s assessment of the evidence. Possible outcomes include legal commitments from the companies to change the way they do business; compensation claims, or if necessary, the CMA could take firms to court.

The housebuilders said they will co-operate with the watchdog, and Persimmon added: “A proportion of our properties were sold on a leasehold basis in the past. Following consultation with government, stakeholders and customers we took the decision to stop selling leasehold houses where Persimmon owns the land freehold in 2017. Any customers of a Persimmon leasehold property in the last six years have been given the right to buy their lease at below market value and many have done so.”