In a letter to secretary of state for housing MP James Brokenshire he said the HCLG welcomes the investigation, but said the CMA needs more powers to do so.
The chairman of the housing, communities and local government committee (HCLG) MP Clive Betts, has called for the Competition and Markets Authority (CMA) to be given more powers to investigate the leasehold market.
In a letter to secretary of state for housing MP James Brokenshire he said the HCLG welcomes the investigation, but said the CMA needs more powers to do so, as consumer protection laws aren’t enough.
The letter read: “The evidence we heard during our inquiry into leasehold reform demonstrated very clearly that a significant number of leaseholders had similar stories to tell about onerous ground rents, high and opaque service charges and one-off bills, unfair permission charges and alleged mis-selling of leasehold properties by developers.
“It is right that these claims are finally acknowledged by regulators and fully investigated in a fair, transparent and impartial way.
“We note that the CMA has committed to use its consumer protection law powers and that this has the potential to lead to enforcement proceedings if evidence is uncovered to justify such action.
“It is, however, widely acknowledged that the CMA’s power to intervene in broken markets is limited, particularly in the area of consumer protection law.
“By requiring the CMA to pursue cases through the courts, we are concerned that this opens the possibility for unscrupulous developers, freeholders and managing agents to gain the system, prolong disputes with the regulator and, over time, relation and commitment to good behavior made during periods of more heightened scrutiny.”
Betts backed the recommendations that Lord Tyrie Andrew Tyrie, CMA chair, to the secretary of state for business, energy and industrial strategy.
Some of the CMA’s recommendations include more closely aligning the scope of market investigations with that of market studies, so that they both consider adverse effects on consumers.
It also recommended for the CMA to impose legally enforceable requirements (remedies) to address adverse effects on consumers, without having to show that they arise from adverse effects on competition and fines for firms that fail to comply with remedies.
It recommended allowing the CMA to impose remedies on firms in a market at an earlier stage, on an interim basis, if necessary to protect consumers.
Betts’s letter read: “The CMA argues that these changes would bring the CMA’s powers to enforce consumer law into line with those it has over competition law.
“We therefore want to take this opportunity to add our voice to Lord Tyrie’s recommendations for reform of the powers of the CMA.
“Further, we fully support calls for primary legislation to be introduced to give effect to these new powers. The difficulties faced by leaseholders clearly demonstrates the need for the CMA to be given stronger powers to intervene quickly and effectively in such broken markets.”
Lord Tyrie said: “The enforcement powers available to the CMA provide only week deterrence to wrongdoing, both in comparison with competition in force meant, and by international standards.
“A principal deficiency is that-in contrast to its powers to impose competition law-the CMA cannot order the cessation of practices It considers to be illegal, and must instead pursue the businesses through the courts.
“Even when the CMA wins in court, no fines are available.”
