CMA Formally Launch Investigation Into Leasehold Market

The Competition and Markets Authority (CMA) has officially launched its investigation into the leasehold market today, June 11th 2019.

In May, Andrea Coscelli, Chief Executive of the CMA, penned a letter to the committee chair of HCLGC emphasising the need to investigate the most onerous areas of leasehold property including permission fees, doubling ground rents and other onerous terms.

The investigation will determine whether these onerous leasehold features can be considered ‘unfair terms’ as legally defined.

Today, the CMA’s consumer protection law investigation will examine two crucial areas of onerous leasehold terms:

  • Potential mis-selling – this ranges from determining whether those in leaseholds were offered the information necessary to make an informed decision all the way through to looking at the fairness of the lease terms including ground rents and freehold rights options.
  • Potential unfair terms –  this section of the investigation will focus on the fairness of fees being charged to leaseholders. This area will look at doubling ground rents, ‘permission fees’, service fees and administration fees.

In the coming weeks, developers, lenders and freeholders will be contacted by the CMA. They will be asked to share information about the leasehold sales process, including the terms the contracts contain.

The CMA will also seek information on the impact leasehold property is having on leaseholders.

Wherever the investigation finds unfair and onerous terms embedded within contracts or information has been mis-leading to the consumer, enforcement action could be taken.

Robert Godfrey, Partner and Head of Professional Negligence at Simpson Millar, said:

“We represent hundreds of people who feel they are now locked into leasehold deals that make selling their homes tricky, or cost a fortune in ground rents.

“A lease is a very complex document which needs to be carefully and simply explained to clients so they can understand the issues which may arise and make an informed decision in continuing with the purchase.”

“Many of our clients feel they did not have the full extent of a lease explained to them by their conveyancers. We therefore welcome the investigation and urge the CMA to take into consideration not only the financial, but also the emotional impact that this has had on victims as part of their Inquiry.”

George Lusty, Senior Director for Consumer Enforcement, said:

“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.

“Our investigation will shed light on potential misleading practices and unfair terms to help better protect people buying a home in future.”

Will this investigation help create a fair and transparent leasehold system?

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3 Comments

  • test

    “In May, Andrea Coscelli, Chief Executive of the CMA, penned a letter”

    Does not this Authority support technology?

  • test

    While poor advice needs addressing, it is part of the problem to think of this in leasehold terms alone

    Every conveyancer will have come across boundary disputes between freeholders.

    Only a very small proportion of properties lack a connection with another. If only a fence and regardless of whether this is physical or relates to tenure.

    CMA should provide a code requiring co-operation and fair-dealing between all those mutually interested in property to override the express terms of documents between parties .

    Making things different for L&T issues only creates superior/inferior relationships with the problems that follow from that.

    The Party Walls Act is an example of title blind legislation relating to property.

  • test

    Developers should not be able to charge a reservation fee for a new build plot. The reservation fee is simply another expense a buyer has to pay and would lose if the purchase didn’t go ahead. A buyer will have already spent a lot of money on a potential purchase before they even have sight of the lease or their Conveyancers report on the lease and title. I would imagine many buyers feel like they would not be able to afford to lose the reservation fee and withdraw should the lease terms seem onerous.

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