March 25, 2017

Methodist Housing Association flat falls 40% on re-sale, says BBC Radio 4’s You and Yours

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… So about average for our dismal retirement housing market

YouandYourspicBBC Radio 4’s You and Yours programme featured retirement housing this afternoon in an item on the Methodist Housing Association. It can be heard here at 08:09.

Penelope Garnham’s mother, who died in February 2012 aged 96, paid £125,000 in 2007 for a flat in Rowanberries Assisted Living Accommodation, in Bradford, which is owned and run by the Methodist Housing Association.

After her death the flat was on the market for more than a year, and the charges were racking up.

The Garnhams lost £40,000 on the sale of the flat, which was eventually brought back by the Methodist Housing Association for £85,000.

There was also £9,041.52 in service charges for the empty flat, and a payment to the Methodist Housing Association of one per cent of the value of the flat for each year that it had been owned by the Garnhams.

In addition, the family was barred initially from subletting the flat, even though Mrs Garnham was told that there was a waiting list of 33 people wishing to rent from Rowanberries.

The situation was finally resolved when Bradford City Council intervened, and put pressure on the housing association to buy the property back.

The Methodist Housing Association does have a buy-back scheme at 95 per cent of the purchase price – a very tempting offer in an era of low inflation – but Mrs Garnham’s mother did not take this up.

Sebastian O’Kelly, of Carlex / LKP, was interviewed, and said:

“This is an appalling example [of the state of retirement housing] but by no means unusual.

“I anticipate that retirement housing will lose about 40 per cent in value from new, and this was slightly less than that.

“We are dealing with a case at the moment of a family who bought a retirement flat for £205,000. It has just been sold to a commercial buy-back operator for £18,000. That’s a 90 per cent fall in value.”

Mr O’Kelly was asked about the Law Commission and its report into exit or event fees, which developers claim are essential to their business model. Would the Law Commission proposals have helped in this case with the Methodist Housing Association?

“There are two separate things. You do have to pay the service charges even if the flat is empty. In this case the elderly relative died,” replied Mr O’Kelly..

“In some cases, the elderly relative goes into further care. So you have care costs as well as the service charges to maintain an empty flat. For some families this can be financially crippling.

“The Law Commission is investigating exit fees and some of these are completely unjustifiable [in the historic retirement housing leases].

“The Office of Fair Trading looked at these in 2013 and said they were “likely” to be unfair contract term, but then did nothing about it.

“The Law Commission is not addressing this. It is been left to pensioners to mount a high court action against exit fees, and that simply is not going to happen.

Would the Law Commission code of practice for retirement housing operators be the answer?

“No, it is not an answer but it is a help.

“In this particular example the Methodist Housing Association was mounting up charges because it was an empty flat and there were service charges.

“In some mainstream commercial retirement properties there are charges of a one per cent exit fee for no service whatsoever – except for remuneration of the freeholder.

“This is the fee that the OFT said was likely to be an unfair contract term but has done nothing about it. The Law Commission is not going to address that [the historic exit fees widespread in the UK’s 150,000 retirement leasehold properties].

“In this country only 2 per cent of the over-60s live in specialist retirement accommodation compared with 17 per cent in USA and 12 per cent in Australia.

“There is no prospect of pensioners moving into these retirement sites if it is an appalling offering. As it is at the moment.”

Although it was not broadcast, the Methodist Housing Association did make this statement to the BBC:

“We would like to express our sincere regret that the family of Mrs Clarke have found the process of selling their mother’s property stressful.

“Methodist Housing Association provides Retirement Living homes with a range of tenure types. Rowanberries, where Mrs Clarke lived, offers leasehold, shared ownership and rental options.

“In 2007 leaseholders at Rowanberries could opt for a lease which stipulated that MHA would buy the property back at 95% of the original purchase price when the owner was ready to sell.

Mrs Clarke did not choose that option and the lease did not allow subletting. [Anchor housing association simply allowed subletting across its entire retirement portfolio whatever the leases said, in response to unsold properties during the downturn.]

Following Mrs Clarke’s death, when it became clear that the property was proving difficult to sell, we agreed in these specific circumstances to allow the family to sublet the property and offered to defer some charges at this time. We then bought the property back at current market value.

“More recently issued leases do allow for subletting by agreement under certain conditions that protect the tenant and the existing retirement community.

“Charges such as Service and Wellbeing continue if the property is vacant as they are fixed services providing for all residents across the entire scheme.

“If we didn’t continue these charges it may trigger a fee review for all other residents every time a property becomes vacant. The Wellbeing charge covers scheme wide provision of 24 hour staffing and emergency cover, as well as on-site support and activities.”

The Law Commission also made the following statement to the BBC which was not broadcast.

“The Law Commission was asked by the Government in 2014 to look at event fees in light of public dissatisfaction at how some of these fees were being used.

“We concluded that event fees can be useful in some circumstances.

“They can, for example, allow people to use some of their housing wealth to pay for a higher standard of living in their later years.

“However, we also say that the specialist-housing industry needs to do more to make such fees transparent and fair.

“We are working with the industry to develop codes of practice that would commit the industry, among other things, to not imposing fees that are so high as to make sub-letting of specialist housing untenable.”

Carlex would like to thank reporter Marie Devine for her work on this report.