Berkeley faces class action from frustrated investors

Berkeley Homes is facing a possible class action from a group of would-be buyers at several of its London developments. Ten parties – from a group of 13 that the developer is pursuing through the High Court for failing to complete their purchases of homes – have requested that individual counter-claims should be heard together in a class action. Investors in properties at Berkeley’s Chelsea Bridge Wharf and Royal Arsenal developments may also join the group. The group, which is advised by Fenwich Elliot, sent a pre-action protocol letter to Berkeley in December, saying that it would be pursuing a joint action alleging “unconscionable bargain” and misrepresentation. A spokesman for the housebuilder said: “Berkeley Homes does not feel it appropriate to comment on counter-claims made by customers ahead of any court case.” In allegations refuted by Berkeley, the investors claim that the developer overestimated the value of properties when the agreements were made. As evidence, they allege that properties at the developments have fallen in value by between 30% and 40% in the past 18 months. They claim that the average drop in residential values in London is 14%. The possible class action could be a test case for hundreds of buy-to-let investors and house buyers who failed to complete on purchases following the collapse in property values and the mortgage markets. EG figures published in December revealed that, in London, between August 2008 and 7 December 2009, eight parties lodged close to 300 claims against buy-to-let investors who had not completed on off-plan purchase contracts. Berkeley and its subsidiaries have filed more than 20 such claims (19 December, p17).