Event Fees in Retirement Properties

Current project status

  • Initiation: Could include discussing scope and terms of reference with lead Government Department
  • Pre-consultation: Could include approaching interest groups and specialists, producing scoping and issues papers, finalising terms of project
  • Consultation: Likely to include consultation events and paper, making provisional proposals for comment
  • Policy development: Will include analysis of consultation responses. Could include further issues papers and consultation on draft Bill
  • Reported: Usually recommendations for law reform but can be advice to government, scoping report or other recommendations

This project reported on 31 March 2017. We are awaiting a response from Government.

Please Note: This project used to be known as Transfer of Title and Change of Occupancy Fees in Leaseholds

The project

Each year thousands of older people consider a move to specialist retirement properties. These homes are almost always sold on a leasehold rather than freehold basis.

Many of these leases require the owner to pay a fee on certain events – such as sale, sub-letting or change of occupancy. We call these “event fees”.

In 2013, the Office of Fair Trading investigated the use of transfer fees (a type of event fee). They found that terms in leases imposing this type of event fee were potentially unfair.

As a result, in 2014, the Department for Communities and Local Government asked the Law Commission to investigate.

The problem

Our research – involving a review of the law, a series of meetings, open public consultation and a mystery shopping exercise – has shown that there are major problems with event fees.

We found that in some cases:

  • event fees can be hidden in complex leases
  • leaseholders may be charged unexpectedly – even when their spouse or carer moves into the property
  • event fees are often disclosed too late in the process for the consumer to take the fee into account
  • that if consumers do spot event fees, they may fail to appreciate their financial consequences

The ageing population means that the number of people likely to be affected by event fees on retirement properties is likely to increase.

It is therefore clear that there is an urgent need to protect older consumers, who are often vulnerable, from event fees that are unfair or imposed in unfair circumstances.

For more details about our consultation exercise and the responses we received, you can view our consultation paper and summary of responses at the bottom of this page.

Our recommendations

We consider that event fees should be regulated with the introduction of a new code of practice.

We do not call for them to be abolished, because of the benefits they can offer consumers. Event fees can make specialist housing affordable by deferring part of the payment for services until they come to sell.

As a result, the Law Commission recommends a code of practice to be approved by the Secretary of State for Communities and Local Government. The recommended code of practice would:

  • Limit when an event fee can be charged, and, in some situations, the amount that can be charged; and
  • Impose stringent obligations on landlords to provide transparent information about the event fees payable to a consumer early in the purchase process. This information will be in a standardised format, and will enable a consumer to see and take account of:
    • Information about the event fee – how it is calculated, who receives the fee, and what a consumer receives in exchange for the fee; and
    • How much the event fee is likely to be depending on changes in the property’s value.

The code of practice should be supported by an amendment to the Consumer Rights Act 2015 so that it can be enforced by consumers.

Where there is a breach of the code of practice, the Law Commission recommends that in most cases the event fee should not be payable.

We set out our responses in detail in our report, published on 31 March 2017.

The report, along with a shorter summary, is available at the bottom of this page.

How this will help

The Law Commission’s recommended reforms will address concerns that event fees are being charged in unexpected or unfair circumstances. They will also ensure that consumers are provided with clear information about event fees at an early stage in the purchase process.

The recommended reforms are also intended to reduce the uncertainty currently surrounding the legal status of event fee terms. With these reforms stakeholders have told us that private investment of £3.2bn is likely to be forthcoming in the next decade, and the supply of specialist retirement housing expanded significantly.

Download the full report below.

Documents and downloads

Project details

Area of law

Commercial and common law

Commissioner

Stephen Lewis