In a letter to the select committee, CMA chief executive Andrea Coscelli, said the body would follow up on the committee’s report to examine the “extent of any mis-selling and onerous leasehold terms, including whether they might constitute ‘unfair terms’ as legally defined”.
Coscelli said that the CMA would be using its consumer protection law powers rather than conducting a market study, noting that it may then bring in enforcement proceedings if necessary.
She highlighted that the committee had conducted “considerable information gathering” on the general problems in the leasehold market, adding: “The work that the CMA would do on the legal position (under consumer protection law) is envisaged within that overall context, and as complementary to the reform work already under way.”
Clive Betts, chair of the committee, welcomed the investigation, pointing out that the committee’s leasehold study had “laid bare a system in urgent need of reform, where homebuyers are vulnerable to exploitation by freeholders, developers and managing agents”.
He added: “Homebuyers need to be protected and, where evidence of mis-selling is proved it is right that the CMA takes action.”
Mark Hayward, chief executive of NAEA Propertymark, argued that housebuilders and developers have not been sufficiently transparent about what it actually means to buy a leasehold property for too long.
He continued: “Buying a property is a huge undertaking and it should be an exciting time, but for thousands of homeowners, it’s led to financial difficulty as they’ve become trapped in confusing contracts with freeholders.”