Carlex has received an anguished communication from a family considering a purchase of a flat from Churchill Retirement at Elgar Lodge in Malvern.
It is priced at £172,000, but the family says it is “horrified” to discover a very similar resale flat in the same block, advertised by Churchill’s own management/ estate agency branch Millstream (and another estate agent) for £140,000.
The flat is described as under offer.
The family claims that the Churchill sales team has said that only three new apartments remain unsold. However, it is understood that seven apartments remain unsold, two of which are reserved.
Obviously, a resale apartment may have a different price to one sold new by a developer, which can be priced at whatever level a developer chooses.
In addition, the two flats are on different floors and, therefore, are not identical.
It is understood that the resale flat is an executor sale and has been on the market since July last year. It is believed the sale price has been reduced from £160,000 initially, to £150,000 in January and a further reduction to £140,000 in March.
This would have been the decision of the vendor, in this case on behalf of the heirs of the property, not Millstream.
Carlex has long expressed the view that new leasehold retirement flats carry an excessive premium and plummet in value – often to a far greater extent than is indicated here.
They can add up to a significant erosion of a family’s wealth, underlying the point that these flats are a lifestyle choice rather than an investment in property that will track the local market. Rental may well be a better option in some cases.
When comparing new retirement with resales, it is worth noting that an executor may be under greater pressure to secure a sale than a house builder – and in retirement housing almost all sales are on completed stock, rather than bought off plan.
In short, a retirement developer may keep flats on the market for longer than heirs to a property might be prepared to wait.
Service charges have to be paid on an empty flat and, for reasons that are so far unexplained, the retirement leasehold sector imposes draconian subletting fees into the contingency funds – usually one per cent of the purchase/market value.
This mean that a family with a relative requiring further care must pay service charges on an empty flat until an tenant is found; the further care costs; the letting agent’s fees … and one per cent of the purchase price/ market value of the flat into the contingency fund.
Understandably, there is incentive for heirs to get shot of these flats as quickly as possible, taking the hit on sales prices.
These subletting fees featured in Carlex’s discussions with McCarthy and Stone earlier this week.
They will certainly feature again when Carlex meets the members of the Campaign for Housing in Later Life on August 12.
It is unknown whether Churchill Retirement imposes them at Elgar Lodge.
Although Churchill Retirement corresponded with Carlex on this issue, it declined to make a statement.