Retirement Leasehold Fees
We appear to have new developments of retirement apartments popping up all over the country. They come in various guises, from complete self-contained villages to budget apartments on busy roads. Depending on what you can afford, they can offer a cosy, comfortable retirement where all household worries are taken away – in theory. They sound ideal for older people, and are attractively marketed.
At a recent meeting, one of our members, Mike McDonald, shared his experience of moving last year to a leasehold retirement home and has discovered that people have to be very aware of what they are buying into as the lease agreements can be onerous, restrictive and sometime punitive especially if you or your relatives need to sell in the future. Mike is clearly not alone in having serious concerns.
It is important to be aware that retirement properties don’t behave like ordinary houses or flats; they have their own rules and there are many traps for the unwary. When a person purchases a retirement property they may say that they own the property. This could mean one of two things. They may own the freehold (i.e. they own the property outright) or, particularly where the property is a flat rather than a house, they may own a long lease. A long lease typically lasts 99 years or more. Retirement properties can be poor value for money.
One of the problems is that retirement apartments are more likely to go down rather than up in value especially if they have onerous charges. They attract many additional fees which you don’t get with ordinary flats, such as having to pay an exit fee on resale. This fee is a sum of money that goes back to the freeholder and is built into the lease. Service charges are generally far higher than with ordinary flats as so many more services are provided. You have to be sure that your pension or other retirement income will cover these charges. Also, when retirement flats go back on the market, the service charges have to keep being paid until the property sells. This can run into thousands of pounds It is very important to check the length of the lease and the service charges. If the lease has fewer than 85 years to run, it will be very expensive to renew and the value of the property will continue to decrease as the lease wears down.
Make careful inquiries about the management structure too. Ideally, the block will be run by the residents through a residents’ management company, or a Right to Manage company. However, it is more common that the management will be in the hands of the freeholders, and residents will have very little say in what they are charged for repairs and maintenance. Right to Manage blocks have lower service charges and more harmony among residents. Another problem is that the managing agents and maintenance companies are often offshoots of the freeholder, and so there is no competitive tendering for jobs. This has led to many complaints from residents about being overcharged.
Is it all bad news? No Retirement leasehold flats can offer many attractions over ordinary flats and houses, such as a ready-made community, a communal lounge, and social activities for residents and services on site, so you need to be very clear about what you are buying into. The Law Commission in conjunction with The Property Ombudsman (TPO) issued a report in April following 2 years of research. The report heavily criticises retirement property landlords for charging hidden leasehold fees when properties are sold or sub-let and makes a series of recommendations to government for reform.
There are some impressive retirement developments and more companies coming into the market, so if you are considering a retirement flat make sure you look into it thoroughly. The following are useful sources:
• Carlex, (Campaign Against Retirement Leasehold Exploitation) for advice & info. Lots of detail on specific retirement home
operators: www.carlex.org.uk or 07808 328 230
• LEASE are a independent provider of free information and initial advice & guidance and have a useful report on retirement leases: www.lease-advice.org or 0207 7832 2500
• AgeUK have a useful guide on buying retirement housing: www.ageuk.org.uk and put Buying Retirement Housing in the search bar or call 0800 678 1174
Article from BOPAG