Any words of advice for this reader poised to buy a retirement leasehold flat?
(Please do not grandstand or name individual companies: helpful advice only, thanks.)
Last week we went with my mother to view a retirement leasehold site in Cornwall. We were all very surprised to be so impressed by the quality of the development and she immediately decided to reserve one of the few remaining two-bed flats.
We were pleased we did, as the next day was their open day and another three went.
There remains a high level of customer interest in the development.
We are sure that, from a living point of view, the move will be great for her, a very active 84 year old, and give her much more social contact than she has at the moment as she feels isolated in a development consisting almost entirely of holiday rentals.
She has already been to coffee mornings at the site and met some of the other new residents, so she is mentally very committed to the move already.
Our reaction to the sales staff and management at the property has so far been very positive as they seem very professional and genuine.
We have been quoted a price of £269,950 for this very spacious apartment with lots of light and a large south-facing balcony.
We have paid a £350 reservation fee until October 6th to determine with other members of the family whether we want to finance the purchase via the sale of her existing property or by cashing in some investments and renting her current house.
The developer will give us a £10k discount if we are cash buyers. At the moment we are tending to think that it would be more straightforward to go down the usual route of buying and selling.
I have just come across your site and wondered if I could be put in contact with anyone who has had recent experience of new retirement leasehold developments, so we can be aware of the pitfalls.
I know that you do not recommend getting involved in leasehold arrangements of this kind, but I think that it would be psychologically extremely difficult to change my mother’s mind at this stage.
Questions I have, include:
What room might there be for negotiation around the asking price, given the apparent strong interest in the development?
Are there risks in using the “partner” solicitor (in this case a named independent firm)?
Many thanks for any advice or warnings available out there.
Carlex’s recommendation would be to rent and, failing that, not buy new build where values are simply what the sales team chances. We would also favour housing association over commercial housebuilder.
It is possible that the other flats are selling well but – if so – why are they offering a discount?
You must assume a high loss in value on a new retirement leasehold flat – most are still 40 per cent off peak.
(One in Rutland which cost £400,000 is now on the market for £250,000 and has been on the market for six years at a cost of £36,500 in service charges. This is obviously the high end of the market.)
Most large retirement housebuilders manage their own blocks (as they once did in the past). But these management services are largely post housing boom and are tiny compared with Peverel’s 1,466 blocks.
Typical wheezes include: very low trade-in prices for part-exchange sales (avoid at all costs, search Channel Four Despatches on Carlex); building with sneaky revenue generating clauses in the lease (the most blatant – exit fees – have largely been stopped on new projects by mainstream builders, but the consequences of them we are still living with); and flogging off freeholds to the highest bidder at auctions, who will then monetize.
It would be nice to see retirement builders building commonhold or – if we have to have leasehold – leases including a residents’ management company in the lease so the residents are empowered from the start. It only has to make one decision: appoint a managing agent of its choosing.
A developer-recommended solicitor is IN ITSELF a reason not to use the firm. Find a proper solicitors’ firm that is used to dealing with leasehold.
Regarding exit fees, these are typically two per cent: one per cent exit fee that was just an earner (which has largely gone), and one per cent for the contingency fund (which Carlex has never disputed).
You should regard this as a lifestyle choice more akin to joining a golf club than a property investment. There are plenty of posts on the Carlex site showing that these can be a problematic purchase and inheritance. It is very unlikely that the price of this flat will have risen in five years time.