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TThe UK Competition Authority has launched an investigation into four of Britain’s largest homebuilders over allegations of “unfair terms in relation to land leases in leases and potential bad sales”.

The Competition and Markets Authority said Barratt Developments, Countryside Properties, Persimmon Homes and Taylor Wimpey may have violated consumer protection law, misleading buyers and unfairly treating renters.

The following areas of interest have been identified:

Failure to realize the sale

Land rents: The developers failed to clarify exactly what the rent for the land is, whether it is increasing over time, when and by how much the increases will occur.

Availability of freehold: People who are misled about the availability of freehold properties. For example, the Capital Market Authority found evidence that some people were told that real estate in a property would only be sold as rental homes, while they were later sold as freehold properties to other buyers.

Freehold cost: People who are being misled about the cost of converting their leases into freehold. When purchasing their home, the CMA found evidence that some people were told that freehold ownership would only cost a small amount, but later the price rose by thousands of pounds without warning.

Unfair Selling Tactics: Developers use unfair selling techniques – such as short, unnecessary deadlines to complete purchases – to secure a deal, which means people may feel pressured and rushed to buy properties that they might not have bought had they given more time.

Unfair contract terms

• Using unfair contract terms means homeowners have to pay escalating floor rents, which in some cases can double every 10 years. This increase was included in contracts, which means that people can also struggle to sell their homes and find themselves trapped.

The Capital Markets Authority said it would also consider using the controversial retail price index as a basis for increasing rents, warning that it was concerned about using the measure under review.

Andrea Coselli, CEO of the International Atomic Energy Agency, said:

It is unacceptable for home developers to mislead homebuyers or take advantage of them. That’s why we’ve launched enforcement action today.

Everyone involved in the sale of rental homes should note the following: If our investigation shows that there was a wrong sale or unfair contract terms, they will not be tolerated.