News that the Competition and Markets Authority is launching enforcement action involving four major housebuilders put pressure on share prices in the sector today.
The regulator said it had ‘uncovered troubling evidence’ of potentially unfair terms concerning ground rents in leasehold contracts and potential mis-selling.
It also said leasehold homeowners may have been unfairly treated, and that buyers may have been misled by developers.
Of the four companies affected Barratt Developments (BDEV) fell 3.2% to 522p, Countryside (CSP) shed 1.3% to 321.27p, Taylor Wimpey (TW.) reversed 1.2% to 119.39p and Persimmon (PSN) dropped 2.2% to £25.82.
Initial responses to the news from Barratt, Countryside and Taylor Wimpey did little more than note the investigation and pledge to co-operate.
MIS-SELLING ‘WILL NOT BE TOLERATED’
Andrea Coscelli, CMA Chief Executive, said: ‘It is unacceptable for housing developers to mislead or take advantage of homebuyers. That’s why we’ve launched today’s enforcement action.
‘Everyone involved in selling leasehold homes should take note: if our investigation demonstrates that there has been mis-selling or unfair contract terms, these will not be tolerated.’
Alongside its enforcement action, the CMA is also sending letters to a number of other developers, encouraging them to review their practices to make sure they are treating consumers fairly and complying with the law.
Depending on the assessment of the evidence outcomes could include legal commitments from the firms to change the way they do business or potentially court action if required.
AJ Bell investment director Russ Mould says: ‘Some purchasers of new homes have been hit by escalating ground rents on leasehold properties, leaving them with big bills and making it difficult for them to sell their properties on - with claims they weren’t properly informed during the buying process.
‘The last thing the sector needs heading into a recession is to face a mis-selling scandal akin to the PPI debacle which hit the banks in the wake of the financial crisis.’
BERKELEY’S BIG CASH PILE
Separately high end housebuilder Berkeley (BKG) gained 1.3% to £47.07 on a robust trading update, the first since the untimely death of founder and chairman Tony Pidgely in June, which revealed the company is still sitting on net cash of more than £1 billion.
Looking ahead, the company maintained guidance of £500 million of pre-tax profit for the full year and its commitment to its shareholder returns programme of £280 million a year.
Though the company did flag risks associated with a potential Covid-19 second wave and Brexit.
