CMA investigates housebuilders for unfair practices

The Competition and Markets Authority (CMA) has launched an investigation into four national housebuilding firms, into whether they may have broken consumer protection laws and treated leasehold homeowners unfairly.

The CMA has launched enforcement cases against Barratt Developments, Countryside Properties, Persimmon Homes and Taylor Wimpey.

The CMA’s action relates to the following areas of concern:

• Ground rents:
• Availability of freehold:
• Cost of the freehold:
• Unfair sales tactics:
• The use of unfair contract terms:

Alongside these issues, the CMA will also be looking further into ground rent increases based on the Retail Price Index (RPI) and may take enforcement action should it find evidence of unfair practices in relation to these. In particular, the CMA is concerned about the fairness of escalating ground rent terms linked to RPI and that these are not always effectively explained by developers when discussing RPI-based ground rent with prospective homeowners.

The CMA will also be investigating certain firms who bought freeholds from these developers and have continued to use the same unfair leasehold contract terms.

Alongside its enforcement action, the CMA is also sending letters to a number of other developers, encouraging them to review their practices to make sure they are treating consumers fairly and complying with the law.

CMA chief executive, Andrea Coscelli said: “It is unacceptable for housing developers to mislead or take advantage of homebuyers. That’s why we’ve launched today’s enforcement action.

“If our investigation demonstrates that there has been mis-selling or unfair contract terms, these will not be tolerated.”

The cases could result in the four developers being taken to court by the CMA.