Property News > Watchdog to investigate toxic leaseholds

Watchdog to investigate toxic leaseholds

The claim that thousands of properties were mis-sold under what have become known as ‘toxic’ leases is being investigated by the Competition and Markets Authority (CMA)

The leases, often sold on by developers, contained various onerous clauses which saw property owners paying large amounts to make minor changes to their home, as well as extortionate ground rent costs. 

Traditionally, these clauses are used in sales of flats, but they have become increasingly commonplace among developers when selling new homes. It is estimated that as many as 100,000 households could be stuck in homes with ‘onerous’ leases as they cannot sell them.

The decision to investigate this comes after years of campaigning, and the Secretary of State for Housing, James Brokenshire, has labelled the leases ‘exploitative and unfair’. The Government has now banned such leases and the CMA is now under instruction to find out whether the leaseholds have been mis-sold. 

‘These have no place in a modern housing market and I have repeatedly made clear my ambition to end them. That’s why I asked the Competition and Markets Authority to look into the issue and I am pleased to see it is now taking action.”

According to a CMA spokesperson, concerns have been raised by the select committee that homeowners are not in a position to make well-informed decisions when buying a long leasehold property, and are essentially unaware that they are signing up to such terms. 

‘We have committed to investigating whether these homeowners are being hit with expensive fees or unfair contract terms, as well as being given all the information they need before signing on the dotted line. We will set out the full terms of this work when it begins,’ the spokesperson added.

The news was welcomed by the National Leasehold Campaign. ‘We are thrilled the CMA has listened to the housing committee’s concerns. We hope this is the first of many of their recommendations to be implemented,’ its statement read.

Meanwhile, the decision was also welcomed by Mark Hayward, chief executive of the National Association of Estate Agents (NAEA). ‘For too long, house builders and developers have not been transparent enough about what it actually means to buy a leasehold property,’ he said.

‘Buying a property is a huge undertaking and it should be an exciting time, but for thousands of homeowners, it’s led to financial difficulty as they’ve become trapped in confusing contracts with freeholders,’ he added.

Research carried out by the NAEA revealed that some 62% of homeowners feel they have been mis-sold their lease, while 93% said that they would avoid buying another leasehold property. 

According to the Home Builders Federation, the CMA should, as part of their investigation, highlight the wider issues around the sale of leasehold properties and separate fact from fiction. ‘Leasehold remains a safe and secure tenure for millions of people,’ a spokesman said.

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