CMA launches investigation into the leasehold housing market

United Kingdom

The Competition and Market Authority (CMA) has launched an investigation into breach of consumer protection laws in respect of the leasehold housing market.

The investigation, which was launched on 11 June 2019, is in line with the Government’s initiative to better protect home buyers and was triggered by increasing concerns that purchasers of leasehold properties are not given clarity on the risks and obligations imposed on them.  As George Lusty, Senior Director of the Consumer Protection at the CMA says “Buying a home is one of the most expensive and important purchases a person can make. So, it’s essential they fully understand the contract they are signing – including whether they will have to pay more than they bargained for.”

The CMA’s investigation focuses on two crucial issues: 

  1. Potential mis-selling – whether buyers are provided with necessary information about leasehold properties for example, obligations imposed on them in the lease and their right to purchase the freehold. 
  1. Potential unfair terms – the burden of paying excessive fees to freeholders and managing agents for example, where homeowners want to carry out improvements to their properties or increasing ground rents which have an impact on the value and marketability of homes. 

The CMA will be corresponding with many market leaders including lenders, freeholders and developers to obtain information about the process behind leasehold purchases and the terms being offered. If the CMA considers that a company is mis-selling or proposing unfair terms, the CMA may take enforcement action against the company. 

The CMA is encouraging responses to the investigation and has invited comments to be sent to specific email addresses depending on the concern, as set out on the attached link https://www.gov.uk/cma-cases/leasehold. The deadline to provide an initial response is 12 July 2019.