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Are Developers Deliberately Misleading Leasehold Property Buyers?

A worrying report published by the Competition and Markets Authority (CMA) suggests that a growing number of leasehold property buyers are being deliberately misled by developers. Many buyers are being subjected to unfair treatment, while being charged excessive fees without reasonable justification.

No specific developers or housing companies were named, but the CMA has insisted it intends to take action against those ‘trapping’ unsuspecting buyers with misleading information and false promises.

Specifically, the report from the CMA accuses housing developers of failing to explain what purchasing a leasehold property entails, or that the properties they are selling are in fact on leasehold contracts.

Stealth Fees, Hidden Costs

Many of those affected reportedly were not informed ahead of time of additional fees and costs like regular ground rent payments. By the time the true terms and conditions of the sale became clear, it was too late to pull out without losing vast sums of money.

The CMA investigation found that some property developers doubled their ground rent charges every 10 years, making it difficult or even impossible for the leasehold property owners to sell their homes at a later date for an acceptable price.

In an interview with BBC Radio Five Live, CMA representative George Lusty stated that those affected could be entitled to refunds.

“If we can attack and challenge these unfair ground rent terms, then they’re invalid – all the money that was collected on them isn’t valid and that has to be paid back,” he said.

“We’re going to do everything we can to get people out of these really serious traps they find themselves in,”

“People aren’t able to take mortgages on these properties. They can’t sell them, that’s a terrible outcome and absolutely devastating for the people affected.”

Ultimately, the CMA is pushing for a change in the law, which will make it a legal requirement for property developers to provide clear, complete and consistent disclosures of the terms and conditions attached to all leasehold contracts.

In addition, ground rents should be reduced to zero and heavy restrictions should be placed on the sale of new leasehold properties across the board, so states the CMA.

Growing Government Support

Echoing the concerns of the Competition and Markets Authority, the Ministry of Housing, Communities and Local Government reaffirmed its commitment to swift and extensive reform for the benefit of buyers.

“In the past two years, the government has taken more action to stop unfair leasehold practices than ever before – including reducing ground rents to a peppercorn and banning the sale of new leasehold houses,” it said in a statement.

“But we know more needs to be done to support leaseholders and the CMA report echoes our commitment to bring forward legislation to reduce ground rents to zero for future leases.”

Last Updated: Mar 4, 2020 @ 3:54 pm
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