The fate of “fake freeholds”?
12 June 2019
The Government announced yesterday (11 June 2019) that the Competition and Marketing Authority (CMA) is launching an investigation into the leasehold housing market with regards to mis-selling, unfair ground rent and service charge clauses (potential breaches of consumer protection law in the leasehold housing market).
The investigation follows the highlighting in the media (Guardian and The Times) of the recent practice of certain developers in selling houses on 999-year leases to people who are led to believe that they are being sold an interest equivalent to a freehold. The freehold is then retained by the developer or sold to a third party, who may then enforce onerous terms of those leases. Commonly-reported problem clauses include ground rents that double every 10 years, high service charges, and strict prohibitions on how the property may be used.
From a consumer perspective, this investigation will be welcomed. Whilst some developers have already voluntarily agreed to end the practice of selling homes on freeholds, there remains at present no legislative restrictions or prohibitions on granting leaseholds of houses.