Parliament should end the levying of transfer fees – that is, exit fees and sub-letting fees – or allow the Leasehold Valuation Tribunals to rule on their reasonableness,
This is one of the key findings in the Office of Fair Trading’s prolonged investigation – published today – into a lucrative and unjustifiable earner that is unique to the retirement leasehold industry.
The “egregious unfairness around such terms” have long caused the OFT concern. McCarthy and Stone was pressurized into giving up enforcing exit fees in January 2009 and stopped including them in future leases.
But as McCarthy and Stone had already sold its freeholds with these lucrative income streams to the Tchenguiz Family Trust, it had little effect on the developer.
The Tchenguiz freehold companies enforce exit fees, but agreed last summer to moderate the punitive capital value percentages on sub-letting – which made retirement leasehold properties uneconomic to rent out.
The OFT sees little future in the retirement leasehold housing sector where these fees apply:
However, from an economic and policy perspective we remain of the view that the transfer fee model is not optimal for consumers. For this reason, although we have sought to improve the position for leaseholders (tenants) in relation to existing leases, we have consistently maintained our position that we want this business model to cease being used in newly built or acquired developments. Consistent with that view, most of the landlords we have actively investigated have agreed not to include transfer fee terms in the leases of new retirement home developments, unless the transfer fee is for a service and is no more than the actual costs reasonably incurred.
We intend to keep the sector under review in order to monitor compliance with undertakings given to the OFT by some landlords, and will have specific regard to any new evidence or changes in the law that may arise.
Finally, we recommend that legislative reform be considered as a means to address the difficulties tenants have in challenging the reasonableness of transfer fees, such as for example by expanding the remit of the Leasehold Valuation Tribunal to allow the tribunal to rule on the reasonableness of such fees or by prohibiting the levying of such fees altogether.”
The discrediting of transfer fees – a nice earner for years in the retirement leasehold sector, opens the possibility of a new model for retirement living.
Carlex will give the report long consideration. It strongly favours developers building retirement housing, selling it and then … just go away!
Instead, McCarthy and Stone and its imitators encrusted the lease with revenue earners, one of which the OFT has trashed today.
The full OFT report can be read here