Housebuilders fall as watchdog announces lease action
By Sean Farrell
Date: Friday 28 Feb 2020
(Sharecast News) - Housebuilders's share prices fell after the competition regulator said it would take action against companies that tie home buyers into onerous leases that make properties unsellable.
The Competition and Markets Authority said it was completing legal work to take direct action against companies it believes have broken consumer protection law. Companies may have to sign legal agreements to change how they do business. If they fail to do so the CMA will consider pursuing them through the courts, it said.
Barratt Developments shares fell 6.8% to 716.20p at 09:34 GMT in a wider market selloff. Persimmon shares dropped 4.7% to £27.45 and Taylor Wimpey fell 5.6% to 193.85p.
The CMA said examples of consumers being misled included:
Rapidly rising ground rents that sometimes double every 10 years, trapping them in homes no one wants to buy
Large increases in the cost of purchasing a freehold after the housebuyer was told the price would be negligible
Developers telling buyers there is no difference between a leasehold and freehold to hide leasehold charges
Unreasonably high fees for maintaining a building or granting permission to make improvements
The CMA investigated sales of leasehold properties after the government accused developers of a culture of consumer exploitation. As many as 100,000 households are living in homes with onerous leases that make selling the house impossible.
Andrea Coscelli, the CMA's chief executive, said: "We have found worrying evidence that people who buy leasehold properties are being misled and taken advantage of. We'll be looking carefully at the problems we've found, which include escalating ground rents and misleading information, and will be taking our own enforcement action directly in the sector shortly."
Housebuilders accused of selling onerous leases such as Taylor Wimpey and Persimmon have said the terms of their leases were explained to buyers.
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