Watchdog drops case against Barratt Homes in leasehold mis-selling scandal

An investigation into alleged mis-selling by housebuilder Barratt Homes has been dropped by the competition watchdog after it found “insufficient” evidence to take legal action.

Four of the UK’s biggest housebuilders came under scrutiny from the Competition and Markets Authority (CMA) more than two years ago as it probed the leasehold housing market.

It followed allegations that large developers had broken consumer protection laws by mis-selling leasehold homes and using unfair contract terms which tied some leaseholders to homes they could not sell.

In December, housing giant Taylor Wimpey agreed to scrap terms from leasehold contracts which caused ground rents to double in price every decade.

And 15 more businesses committing to removing the unfair terms in March, effectively freeing thousands more leaseholders from spiralling ground rents which trapped them in unsellable homes, the CMA said.

But the watchdog reported on Tuesday that it has closed the case against Barratt Homes and will not be pursuing a legal case.

The CMA said: “Following careful scrutiny of the evidence gathered, the CMA concluded that it was insufficient to support a clear legal case for the CMA to secure collective redress for Barratt leaseholders under its consumer law powers.

“Barratt’s sales practices have changed, and they no longer sell leasehold houses.”

It means that anyone who believes they have been mis-sold a leasehold home by Barratt will not be compensated as part of collective legal action. There is insufficient evidence that Barratt has mis-sold any homes for the CMA to pursue a clear legal case, it said.

But people can still seek individual action if they feel they are victims of mis-selling, the CMA added.

Sebastian O’Kelly, chief executive of the charity Leasehold Knowledge Partnership which campaigns to reform leaseholding rules, said housebuilders must be scrutinised.

“Barratt was a lesser offender in selling leasehold homes with such aggressive ground rents that they were subsequently unsellable,” he said.

“Nonetheless, housebuilders sold leasehold homes often to buyers subsidised by taxpayer loans with purposely designed investment assets squirrelled into them, and then sold these lucrative freeholds to private equity punters, often based offshore.

“This practice has eroded the moral authority of this sector, along with the post-Grenfell building safety scandal, and the public must never allow these subsidised homebuilders such un-scrutinised freedom again.”

Barratt said it is “pleased to note” the CMA has closed the investigation after working with the watchdog throughout.

An investigation into others in the leasehold market is still open.