Families face paying hundreds of thousands of pounds to sell relatives’ retirement homes – how to check YOUR fees
FAMILIES face paying up to hundreds of thousands of pounds in "deferred fees" when they come to sell relatives' retirement homes, The Sun has found.
Retirement villages are housing developments specifically built for elderly homeowners and usually include a number of communal services on site such as restaurants, as well as easy access to care.
This can be appealing for older residents looking for a sense of community and amenities close by.
However, there are a number of downsides to these properties.
For example, they are usually leasehold, which means you don't actually own the property - just the right to live in it.
But the major drawback is that a lot of these developments charge extortionate fees when you come to sell the property - and that's after monthly or weekly service charges.
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According to Leasehold Knowledge Partnership, retirement development exit fees average around 12% of the property's sale price.
On a property worth £400,000, that would be a deferred fee of £48,000.
But an investigation by The Sun has found some retirement developers are charging as much as 30%, meaning families face forking out up to hundreds of thousands of pounds.
Experts are concerned that while these charges may be detailed in the terms and conditions, they often have confusing names and many elderly buyers do not really understand them.
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And it is often their families who end up paying these fees out of their relatives' estate, meaning they end up with far less than they expected.
Experts say the properties are now becoming difficult to re-sell as people don't want to take on the burden of these expensive fees.
'Buy now, pay later' service charges
Many retirees opt to buy retirement homes knowing they may face high monthly service charges, but judge that it's worth it for the lifestyle they offer.
But some residents have said they didn't understand that they would have to pay fees when they came to sell the property too.
These "exit charges" often have confusing names and the terms differ from developer to developer.
For example, we have found fees called "deferred membership fees", "communal facilities fees", "sinking fund contributions" and "contingency fees" - all of which are fees charged on the sale price.
Retirement developers have argued that these fees cover the costs of building on-site services. But residents also pay expensive monthly service fees, which also claim to cover these costs.
Luxury retirement village Battersea Place in Battersea, London, offers two deferred fee options: either paying a 10% "deferred membership fee" in year one, up to a max of 30% after three years, or, alternatively, paying 20% after three years, plus half of any gains.
A "gain" is the amount between the original price the property was bought the property for and the price it resells for, assuming it increases in value.
So, for example, if someone bought a flat for £1million - the going rate for a flat in Battersea Place - and sold it for £1.1million after living in it for three years, they would have to pay £300,000 in deferred membership fees plus £50,000 from the gains.
That's a total of £350,000 in deferred fees - and that's after paying a "fixed monthly service charge" that is agreed when the home is bought.
Another retirement development company, Adlington Retirement Living, charges a "communal facilities fee" of 2% a year up to a maximum of 10 years - so 20% - at The Chimes, one of its villages in Cheadle, Greater Manchester.
That means on a property worth £400,000, you would pay £80,000 in fees if you sold it after a decade.
Adlington says these fees pay to cover the cost of the on-site services. But residents also pay a monthly service charge.
One resident at The Chimes who spoke with The Sun said she pays £900 a month in service charges, but faces tens of thousands of pounds being charged in deferred "communal facilities fees".
She said: "Our monthly service fee increases every year and it's now at £900 a month - we just feel that Adlington grab every penny possible and we don't seem to see any benefits coming our way."
And at Adlington's Woodlands village in Heaton Mersey, residents are charged 3% a year, capped at six years (18%).
This is on top of a weekly "service and well-being charge" of £140-£163, depending on the size of the property - so up to £8,476 over 52 weeks.
If you lived in the property for six years and sold it for £400,000 you would pay over £50,000 in service charges, plus £72,000 in deferred communal facilities fees.
Audley Village, another top retirement village developer, says it charges a "deferred management charge" payable on either the sale of your home or a change of occupier.
It charges a deferred fee of 1% per year for each year the property is owned, up to a maximum of 15% after 15 years, charged on the final sale price or "agreed market value".
In its fee documents for its Audley Binswood village, it says this would equal a fee of £113,444 on a £756,295 home (bought for £500,000) after 15 years.
Lib Dem MP for North Shropshire Helen Morgan, who campaigns against so-called "fleecehold" charges, told The Sun: “It is completely wrong that so many pensioners are being ripped off by unscrupulous developers.
“Every current and future charge should be spelled out to potential purchasers before any decision is made so they are not caught out later on.
“Residents of retirement homes should also be given a simple mechanism where they can challenge unfair fees.
“As it stands, all the power lies with the developer and it is vulnerable pensioners who lose out as a result.”
Consumer disputes expert Scott Dixon, of blog The Complaints Resolver, said the charges are "daylight robbery" and often leave little inheritance to pass onto loved ones.
He told The Sun: "These 'award-winning' retirement villages sell a seductive dream to elderly homeowners for peace of mind, a carefree lifestyle and a sense of community.
"But in reality, homeowners or their families face having their hard-earned wealth being wiped out by extortionate fees on resale, which are often not clearly explained.
"Having a 'communal facilities fee' being sold as a 'buy now, pay later' enjoyment linked to a percentage of the final sale price is astonishing. It may be legal, but it is clearly unethical."
Have you or your family been affected by high retirement village fees? Get in touch [email protected]
Other issues with retirement villages
As well as deferred fees, most retirement flats come with a weekly or monthly service charge, and there is no cap on how much these can increase by.
Recent research by Lottie found the average monthly service charge for a retirement flat is £523.99 - or £6,287.88 a year.
Another major drawback of retirement flats is that they now often lose value over time as prospective owners have become aware of these issues.
According to research by the Elderly Accommodation Counsel, roughly half of new build retirement homes sold over a 10-year period resold at a loss.
In a forum on campaign group Homeowners Alliance's website, a number of retirement home residents have complained that they didn't fully understand the implications of buying their proprety.
One homeowner commented: "My mum lived in her property for only one year before dying suddenly. It took over six years to sell her flat last month, we ran up over £60,000 in service fees on an empty flat, plus ground rent and council tax over those years.
"We sold for 50% of her original purchase price. In all, we lost over £200, 000 of her estate and we’re left with a very small amount from her lifetime of saving."
Adlington and Audley's responses
Here is what a spokesperson for Adlington Retirement Villages said in response to this article:
"Our retirement communities provide extensive communal facilities which are open to all homeowners.
"The cost of building these facilities is paid for using the communal facilities fee, so homeowners can enjoy them when they live in our community but pay for them when their home is sold.
"This fee also includes ongoing replacement of any common parts of the building and a long-term refurbishment programme of the interiors, to ensure the building is retained to a high standard now and in the future.
"The Communal Facilities Fee covers the creation of the restaurant, coffee lounge, activities studio, hair salon, therapy suite, and private gardens. It is industry standard not to wrap those costs into the price of an apartment.
“In addition, there is a monthly Service & Wellbeing Charge, which covers the dedicated team who are on-site 24/7, 365 days a year, and the resources required to operate our communities on a day-to-day basis.
"This level of support enables individuals to live in their own home and remain independent well into their later years, providing peace of mind for individuals and their families.
"All costs and charges are fully transparent and fully explained to homeowners throughout the purchase journey.”
A spokesperson for Audley Group said:
"Our fees ensure that all the costs of running an Audley village are met, and that we can continue investing in the villages. Using a deferred model ensures that our monthly fees remain manageable for our owners, as they are able to defer some of the cost until when they leave.
"The fees cover ongoing costs such as maintaining the exterior of the properties and the central facilities, providing discreet but effective security, and landscaping the village grounds.
"The management charges also cover any longer-term structural repairs or improvements, from resurfacing roadways and pathways, to re-roofing properties. This means that no owner will ever be asked for extra unexpected money.
"Transparency on these fees is important and we are signed up to the Associated Retirement Community Operators (ARCO) consumer code which commits providers to ensuring that both current and prospective owners are fully aware of the fees."
Battersea Place was contacted for further comment.
How do I know what charges I'll have to pay?
If you're not sure what charges you need to pay when you sell your retirement flat, ask for a document explaining all of the fees and charges. The developer should be able to provide this for you.
If you aren't sure what they mean, ask the developer, or you can ask a charity like Citizens Advice to help explain them to you.
Be aware that any exit fees charged on the sale of your home may be called something different. Look out for key words like "deferred" or anything that suggests the fee may be payable later.
Also look for any fees that say they will be charged on the "agreed sale price" or "market value" of your home.
If you feel any charges were not clearly explained to you, you may be able to make a formal complaint.
The Property Ombudsman can deal with complaints about retirement developers - you can call them on 01722 333 306.
HomeOwners Alliance has a guide that explains the difference in service fees between providers here: hoa.org.uk/advice/guides-for-homeowners/i-am-buying/retirement-villages-compared/.
Michael Voges, Chief Executive of ARCO, which represents retirement villages, said: "All ARCO members abide by a strict consumer code requiring full transparency and disclosure of deferred management fees at the point of sale, based on recommendations from the Law Commission.
"This means all residents have had the opportunity to make an informed choice about whether to pay more upfront for services and facilities, or via a deferred management fee when a property is sold.
"Charging deferred management fees as a percentage of the resale price means an operator's income is dependent on them maintaining and investing in schemes, in order that a good resale price is achieved. As a result, resale values in the sector match house price inflation.
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"By allowing operators of Integrated Retirement Communities to set more affordable monthly service charges, deferred management fees also enable more older people to access the health and wellbeing benefits of this model of living - who would otherwise be shut out of the sector.
"When given a choice, most residents choose lower monthly service charges and a higher deferred management fee."
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