April 28, 2017

Law Commission investigates retirement transfer fees

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LawCommissionCarlexbigThe Law Commission is reporting its work into the issue of retirement leasehold exit fee here

Anyone who has paid these fees, can contact the Law Commission on this email address:

transfer_fees@lawcommission.gsi.gov.uk

Following a considerable amount of activity by Carlex, the issue of exit and subletting fees was taken up by the Office of Fair Trading, which reported in September 2012 that exit fees were “likely” to be an unfair contract term.

The Law Commission will hopefully conclude the issue.

Work on the project commenced in October 2014, and it expects to publish a consultation paper in September 2015 and make interim recommendations for reform in March 2016

The project was referred to the Law Commission by the Department for Communities and Local Government (DCLG) and will look at leasehold terms that oblige the lessee to pay a fee when title is transferred or where there is a change in occupancy.

“Concerns were raised with the Office of Fair Trading (OFT) about retirement home developments where these terms are chiefly to be found,” the Law Commission says.

“The amount payable is usually calculated as a percentage of the sale price or the original purchase price. Terms may be triggered where the transfer of title is voluntary, for example on sale, or involuntary such as under a property transfer order.

“Change of occupancy terms may be widely drawn and can be triggered on more than one occasion over the lifetime of a lease, for example, where the lessee goes into hospital during spells of illness.

“The OFT concluded that the terms were potentially unfair and that there was a lack of transparency, particularly in the sales material.

“The nature of the terms can be unclear and some appear to fall outside the existing regulatory regimes.

“As a result there may be no means by which a lessee can effectively challenge a term or the reasonableness of the sum involved.

“In response to the OFT’s report some landlords voluntarily entered into undertakings on the use of the terms. However, OFT also recommended that the Government should consider further measures, including legislative reform.”

The Law Commission has set up this month an “advisory panel composed of independent experts and representatives of industry and consumers”. This includes Carlex.

The LC panel has made a number of visits in January:

A tour of Grove Place, a retirement community near Southampton operated by LifeCare Residences

The Carlex/LKP roundtable briefing on leasehold reform at Portcullis House, Westminster

Arnold v Britton UKSC 2013/0193 (an important Supreme Court case on fixed service charges)

“The project will be reviewed in March 2016 at which point we will make interim recommendations for reform. If the project continues we will make final recommendations in March 2017.”

Comments

  1. Michael Hollands says:

    Is this going to be another long winded, very expensive exercise which comes to an inconclusive ending.
    The OFT started it in 2009 and the Law Commission will make recommendations in 2016.
    No doubt it will take a few more years after that for the Government to act, if at all.
    During all this time I wonder how many thousands have suffered the injustice of being charged this Exit Fee.
    When everyone since 2009 has been well aware that the charge is grossly unfair.
    There is something wrong with the system.

    • There is something wrong with the system.

      Michael Hollands is correct. It should not take this long to deal with a contract clause “likely” to be unfair.

      These branches of the state are working too slowly; sometimes tokenistically.

      The officials at the CMA, who were largely employed in the old OFT, seem surprised that no one has used the price-fixing report to litigate.

      I am afraid that just shows their ignorance of how difficult it is to mobilise the elderly to engage with these issues: they live in retirement accommodation because they are retired.

      Most are not able to fight the corporate trickery involved in retirement housing, and others are not willing to do so.

      Others who are more energetic have to stand up for them, instead.

  2. How right you are, out of 28 flats on our development only 6 of the leaseholders have showed any interest in the facts that we had been Price Fixed in 2007/08.

    I understand that the leaseholders have retired and that they want peace and quite, but at what cost?

    Our latest House Manager started work just before Christmas on the 15/12/2014.

    On Monday the 02/02/15 we were informed that the HM had phoned in sick.

    On the 11/02/15 the Area Manager informed us that the HM had left her position with immediate effect.

    The Area Manager has decided to send in a Local House Manager from Shrewsbury to visit 1 day a week as Relief Manager.

    In 2010 we paid £143.43 for a Relief Manager for 10 hours work which was inclusive at £14.43 an hour, which was paid by us. I checked the invoice and found it was not for our development?

    I spent over a year attempting to retrieve this amount wrongfully charged to our development along with 4 other invoices wrongfully charged to us?

    Peverel Retirement take the money straight out of the Service Charges but will not refund until October of the following year. I asked for interest payments on the 5 wrongfully charged invoices but was informed that Peverel Retirement do not pay interest on wrongful invoices?

  3. Developers can sell their new build residential properties under Freehold or Leasehold or Commonhold title. If Developers offer under freehold title or Commonhold title , there will be no conditions included in the sale of property. But a sale under leasehold title means the developer is introducing a Lessor entity to take back the property at the end of the lease.

    This means if they offer leasehold title, most of the extra charges inserted in the lease are not necessary to the construction of the building but they have been included in the lease to boost income to the lessor and enhance the sale value of the freehold. Therefore charges for consent to sublet or transfer fees are unfair.

    Carlex : Please put this point to Law Commission.

  4. Has Senior Officers working at the Law Commission had any experience buying a new -build leasehold flat ?

    The developer’s conveyancing solicitor send a draft lease to the buyer’s solicitor for approval. But if the Buyer’s solicitor should ask for a minor change to the draft lease, this change will be refused as seller solicitor will say all the leases in the block must remain the same. So in practice there is no negotiation on lease terms before exchange of contracts.

    So don’t assume leases are subject to negotiation and varied to meet buyer’s wishes. It does not happen.

    And don’t make any false claims about seller/buyer negotiation in the Law Commission Findings Report