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Sept. 4, 2020, 2:38 a.m. EDT

U.K. regulator probes homebuilders over leaseholds

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By Joe Hoppe

A U.K. regulator said Friday that it has launched an enforcement action into four U.K. house builders, investigating the possibility that they broke consumer protection law relating to leasehold homes.

The Competition and Markets Authority said it is opening cases focusing on the practices of Barratt Developments PLC, Countryside Properties PLC, Persimmon PLC and Taylor Wimpey PLC. It said it uncovered evidence of potentially unfair terms concerning ground rents in leasehold contracts and potential mis-selling, that leasehold homeowners may have been unfairly treated and that buyers may have been misled.

Barratt Developments said early Friday that it is committed to putting customers first and will continue to cooperate with the regulator.

The CMA said its action relates to developers mis-selling ground rents, misleading people about the availability of freehold homes and the cost of converting a leasehold to a freehold. It is also investigating unfair sales tactics, including unnecessarily short deadlines for purchase, and unfair contract terms relating to ground rents, in which homeowners have to pay escalating ground rents that can double every decade.

The CMA added it is also looking further into ground rent increases based on the Retail Price Index and may take action if it finds related unfair practices. It will also investigate some companies that bought freeholds from developers and continued to use the same unfair leasehold contract terms.

Write to Joe Hoppe at joseph.hoppe@wsj.com

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