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Watchdog launches leasehold investigation

The Competition and Markets Authority has called for home owners and industry experts to submit evidence to its investigation into the “potential mis-selling” of leasehold properties, which officially launched today.

The CMA will be examining whether leasehold contract terms were presented fairly and whether unclear terms may have resulted in people being stung by costly fees or onerous conditions.

The investigation will look at two key areas.

Potential mis-selling:

Whether people who have bought a leasehold property are given the information they need to fully understand the obligations they are taking on, for example the requirement to pay ground rent over a certain period of time, or whether they have an accurate understanding of their ability to buy their freehold.

Potential unfair terms:

Whether people are having to pay excessive fees due to unfair contract terms. This will include administration, service, and ‘permission’ charges – where homeowners must pay freeholders and managing agents before making home improvements – and ground rents, which in some cases can double every 10 years.

CMA senior director for consumer enforcement George Lusty 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.

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

The CMA will be insisting that developers, lenders and freeholders supply information on how leaseholds are sold and managed, as well as reviewing the terms in such contracts.

It also wants leaseholders to share their experiences of the impact of fees and contract terms.

The investigation may result in enforcement against any companies that are found to have mislead leaseholders or subjected them to unfair contracts.

Stakeholders can submit evidence to the investigation and follow its progress here.

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