Leasehold homeowners have been unfairly treated while prospective buyers have been misled by housing developers, according to the Competition and Markets Authority (CMA).

The CMA revealed it had seen evidence that people had been misled about the cost of converting their leasehold to freehold ownership.

When buying their home, the authority said that some people were told the freehold would cost only a small sum, only to find this price would increase by thousands of pounds with little warning.

The authority also suggested prospective buyers were not being told upfront that a property was leasehold, and that some developers were failing to explain the differences between leasehold and freehold when directly asked. The CMA suggested some even tell potential buyers that there is no difference.

Furthermore, the CMA indicated concerns that homeowners are having to pay escalating ground rents – which in some cases can double every 10 years – an increase that can be built into contracts, meaning people can often struggle to sell their homes and find themselves trapped.

“We have found worrying evidence that people who buy leasehold properties are being misled and taken advantage of,” CMA chief executive, Andrea Coscelli, said.

“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.”

Responding to the CMA’s announcement, UK Finance director of mortgages, Jackie Bennett, added: “The inappropriate use of leasehold and the detrimental impact it can have on homeowners has been an area of concern for lenders.

“Leasehold is an appropriate tenure in the right circumstances, for example where properties have shared services or are built on land with specific restrictions but it’s crucial it works in the best interest of homebuyers, now and in the future.

“It’s therefore good to see the CMA taking action where unfair practices have been identified. This sends a clear signal that the terms of leasehold should be clear and transparent and that leaseholders should be treated fairly.”

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