This may actually hold to account those who might have abused the system, and perhaps get the right outcomes for those currently stuck with onerous leasehold terms.
There has clearly been a major focus on banning the future sale of leasehold homes – which the Government announced in 2017 – but, as we’re all acutely aware, this action doesn’t help those who have already purchased such properties and there is (without doubt) a need for strong action in this area.
The CMA’s investigation is effectively two-fold:
• Firstly, looking at potential mis-selling and – a key focus of the CA’s work – whether purchasers had all the information they needed up-front in order to make an informed decision and their responsibilities within these leases.
• And secondly, around the potential unfair terms in the leases, for example, whether they have to pay ‘excessive fees due to unfair contract terms’. Again, I’m sure we’ve all seen examples of this around the permission fees payable to Lease Administrators if leaseholders wish to change the property, or notice fees for the registration of a change in mortgage, and of course around issues such as the doubling of ground rents.
Again, these have been much discussed in recent years and, looking forward, I suspect that all those involved will have moved to act to ensure their future leasehold terms do not contain any of the above.
However, what about those historical cases? What about the information – or lack of it – that was offered up to potential leasehold purchasers by the likes of developers and estate agents? Did they meet their responsibilities under the Consumer Protection from Unfair Trading Regulations (CPR) and deliver all the information required, in a timely manner, and prior to the client making a decision about whether to put in an offer or not?
Our survey of home movers in 2017 would lead us to believe that large numbers did not – in fact only 90 out of 1,170 (7.7%) of respondents said they received information prior to offer and 23 out of 1,170 (2%) said they received information prior to viewing, which is when the CPR disclosure should have been made.
If the CMA comes to this conclusion with developers, lenders and freeholders, etc, then the likelihood is it will seek to take enforcement action to change its practices.
The problem of course is that this might well have already happened – indeed, you might argue, why wouldn’t a company involved in this have already made the necessary amendments to their processes?
The CMA is asking for homeowners to feed into its investigation to ensure it has a clear view of the impact such issues will have had on their lives, but will it be able to change the leases they signed up to, in order to make them fairer? Will it be able to provide compensation for what they have been put through?
We will wait to see just how far its enforcement can go. And the bad news is that we’ll probably have to wait at least six months before we get a progress update, because to be fair, there is going to be a lot of work involved sorting through all the information the CMA is likely to be provided with.
In that sense, it’s a further step forward, and we at the CA welcome it, but in terms of getting the solutions we want, it will require further patience from those who have been most affected by these practices. And that should not be seen as satisfactory by any stakeholder.
Beth Rudolf is director of delivery at the Conveyancing Association (CA)