There was wine and canapés and gossip, after attendees had digested the evening’s theme “Building Fairness: Growing a housing market older people can trust”.
Esther Rantzen was the star speaker, putting in a trouper’s performance with an amusing speech that had the message that older people, especially the lonely, can benefit from living together.
Carlex certainly has no issue with that.
Curiously, she is now involved with the McCarthy family’s Churchill Retirement foundation which gives money to good deeds. (She appeared amused by the suggestion that some of the mullah be tipped in the direction of Carlex and LKP, but she had her doubts that that would come off.)
From the Law Commission, greater transparency is – yet again – the message, but on this occasion it is based on evidence and acknowledgement that things need improving in retirement housing.
In the USA, 17% of those over 60 live in retirement housing and in Australia it is 13%. Here in the UK, only 2% of those aged over 65 do so, amounting to 145,000 privately owned units. A further 500,000 units are in the rented retirement sector.
One reason for this – alluded to, but not dwelt upon, in the Law Commission report and, curiously enough, completely ignored in the report The Top of the Ladder by the think tank Demos that was funded by the House Builders’ Federation – is its abysmal reputation established by court rulings, OFT inquiries, collusive tendering scams, giant-scale financial engineering (Tchenguiz), leasehold game-playing, collapsed re-sale values, dubious acquisition and sale of communal assets such as house managers’ flats … and all the rest.
Of course, the Law Commission was not tasked to address these issues, and instead has limited its inquiry to “event” fees. It urges all retirement leaseholders who have any knowledge or experience of exit, sublet of other “event” fees to get in touch by January 29.
Its final report will mainly be of benefit to people yet to buy a retirement property, but it does make some recommendations of immediate use.
On subletting it “asks” landlords not to calculate event fees as a percentage of the open market value of a property. As happened to a family at Gibson Court, Hinchley Wood, a former McCarthy and Stone site now Tchenguiz/ FirstPort, who paid £2,500 into the contingency for a sublet.
The Law Commission says that on sale “the fee should only be charged as a percentage of the lower of the purchase price or the sale price”. That would seem to apply to this family paying £9,341 into the contingency fund at Anchor’s Cherry Trees site in Redcar, Cleveland.
These contributions to the contingency funds are understandably unwelcome given the plummeting value of most retirement flats, but at least they are not to the profit of the landlord.
All sorts of imaginative sublet fees are rife in the non-retirement sector, too.
The Law Commission is completely wrong to declare: “We have already seen some examples of event fees in mainstream residential leases, though this is still rare.”
This is the case for formal fees in the lease, but virtually every lease requires the consent of the landlord to sublet and the fee for this can vary alarmingly. Here is a poor Kensington owner whose sublet fee was £912 because the RMC directors got into a panic over prostitutes moving in
These should be considered “event” fees, because if they are not paid up freeholders and the managing agents that they appoint will take you off to the tribunal, and try to land you with costs.
Sir Peter Bottomley, who spoke at the get-together on Thursday evening, pointed out his and Carlex’s rather more robust approach to “event” fees: we reduced this family’s £850 sublet demand to £100.
Many of the care providers entering this sector have high “event” fees – up to 30% on sale – but they also guaranteed re-purchase prices, such as the ExtraCare Charitable Trust, which Carlex rates highly.
There is also the New Zealand company LifeCare Residences, which has a 30 per cent exit fee. But its offering is for high-end sophisticated purchasers who know that the managed add-ons of the site are really what they are buying. So, a purchase here is more a club membership than a property purchase.
“Event” fees are not a bad way of paying into the contingency fund, and Carlex has never had an issue with them in principle.
Sneaky event fees to the freeholder in the old McCarthy and Stone and other leases, which bumped up the freehold values making them so attractive to a “financial engineer” like Vincent Tchenguiz and many lesser players were another matter.
The Law Commission recognises that there is “widespread dissatisfaction” over these.
It also says – what Demos omitted to do – that “Negative publicity which suggests that specialist housing is exploitative, or charges high hidden fees, is particularly damaging to this underdeveloped market.”
Carlex is less happy that the Law Commission excluded from consideration “relatively small administrative charges” on sales for information provided to sellers. These are more like £300 rather than £150.
The near monopolies of the retirement estate agencies are another area where a dose of transparency is sorely needed.
The Law Commission employed a former financial journalist to go on a mystery shopping exercise visiting six retirement sites.
The information from the sales staff was “patchy”, if not downright “wrong”, as Channel 4 Dispatches demonstrated so clearly at a McCarthy and Stone site where flats were still for sale although the freehold/ manager was by then Tchenguiz/Peverel.
Far more serious was this finding from the mystery shopper:
“I rang to chase up about the lease. The sales person said she had enquired about it but still did not have a copy herself. She said it was not generally available until a client had actually reserved.
“This required a deposit of £1000. She said that Solicitors don’t like giving them out. Our solicitor will talk to your solicitor when you have made the deposit.”
This is extraordinary. The lease is the first document to get when thinking about purchasing a retirement property. It is all you are buying.
In addition, the Law Commission was not impressed by transparency over “event” fees.
“Some sites give the impression of an industry which is not fully committed to fee transparency.”
One retirement housebuilder website reassured purchasers that it did not charge assignment fees, and later said that 4 per cent fee was paid to the sinking fund.
In conclusion, the Law Commission says:
“Specialist housing has major benefits and is a crucial part of preparing for an ageing population. Our aim is to encourage this market sector to develop.
“This requires a balance. It is important that developers are given adequate and reliable income streams which incentivise them to build more specialist housing.”
Money going back to house builders to build more is one thing. Jacking up the value of freeholds to financiers like Vincent Tchenguiz – or the prime minister’s brother-in-law Will Astor, who is buying up retirement and other residential freeholds through Long Harbour – is another thing altogether.
At present, the retirement housebuilders seem to be holding on to their freeholds. Just as well, given the havoc caused by selling them off.
There are just 12 days left to make your submission to the Law Commission on exit fees. Most readers may not feel they have the time to read the 200 page report from the law commission. Reading through the summary is complex enough.
It is very important you give your views so the Law Commission has issued a short summary for those people living in a retirement flat which can be read HERE
There is then a questionnaire they would like you to return which can be found HERE. The file is a word document and your answers can be sent electronically. Alternatively you can print off copies for your fellow residents and they can sent them back in the post.
In case anyone has not read the full 200 page report or wants to look at the questions at the end and respond can read it HERE
Even if you have written to the Law Commission in the build up to this part of the consultation it would still be keen to see your answers to specific questions.