Four of the UK’s largest housebuilders are being investigated after “troubling evidence” was uncovered over the way leaseholds were sold.
Barratt Developments, Countryside Properties, Persimmon Homes and Taylor Wimpey face action from the Competition and Markets Authority (CMA).
Buyers have argued that they were caught in a leasehold trap, with rising ground rents and unfair fees.
The CMA has demanded information from the developers and could go to court.
Andrea Coscelli, chief executive of the CMA, said: “It is unacceptable for housing developers to mislead or take advantage of homebuyers.
“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.”
The watchdog said there was troubling evidence of potentially unfair terms and mis-selling.
The difference between a freeholder and a leaseholder
Someone who owns a property outright, including the land it is built on, is a freeholder.
With a leasehold, the person owns a lease which gives them the right to use the property. But they still have to get their landlord’s permission for any work or changes to their homes.
When a leasehold flat or house is first sold, a lease is granted for a fixed period of time, typically between 99 and 125 years, but sometimes up to 999 years – although people may extend their lease or buy the freehold.
But leasehold house owners are often charged expensive ground rent as well as fees if they want to make changes to their homes. A leasehold house can also be difficult to sell.