Leasehold homeowners have been “misled and taken advantage of” after an investigation by the competition watchdog found “worrying evidence”.
The Competition and Markets Authority (CMA) has issued a damning report following its probe and said it would take action against housebuilders.
It has also called for a change in the law and for refunds to be paid.
The CMA said many homeowners found themselves in “serious traps” after being misled by developers. It has not disclosed any names so far as it continues to investigate.
It found that some buyers were not told upfront that a property was leasehold and what this meant. By the time people found out what owning a leasehold was, including regular ground rent charges, they were often unable to pull out of the sale or would have found it very difficult.
In some cases, ground rents doubled every 10 years. The increase is often built into contracts, meaning people can struggle to sell their homes and find themselves trapped.
The CMA opened a probe last year in the wake of the “leasehold prisoner” scandal that blew up in 2017.
As well as escalating ground rent it found that some homebuyers were “misled” about converting the leasehold into freehold.
It also found that buyers were being charged “excessive and disproportionate fees” for routine maintenance or making home improvements.
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 watchdog said it was “set to launch enforcement action” against companies that had broken consumer protection law.
Housebuilders could be forced to sign legal commitments or face being taken to court.
