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Landlords are set to pick up a refund from builders that sold them leasehold homes after a business watchdog probe uncovered evidence of dodgy dealings and misselling.
The government-backed Competitions and Mergers Authority (CMA) has signalled enforcement action is on the way if developers do not put right the financial plight of customers misled into buying a home with unfair and expensive leasehold terms.
The CMA says no decision has been made on compensation. Still, buyers unaware they were purchasing a leasehold could have the title converted to freehold, while homeowners paying ground rents and unfair service charges could receive refunds.
Developers who do not take the chance to reimburse consumers could face legal action.
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.
“Buying a home is one of the most important and expensive investments you can make, and once you’re living there you want to feel secure and happy. But for thousands of leasehold homeowners, this is not the case.
“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.”
The CMA investigation unearthed thousands of homeowners escalating ground rents that double every ten years, unreasonable costs for maintenance of shared areas and quoted massive charges for buying out the lease on the homes.
Homebuyers are often misled about the property being a leasehold and what it means legally and financially.
A freeholder owns their property, and the land it is built on, while a leaseholder never owns their home or land the property is built on unless they buy the freehold.