In a consultation opening today we look at what can be done to protect owners of retirement flats and their families from unexpected charges hidden in leases.
Leases of retirement flats and bungalows often include a fee triggered by certain events, such as when the owner sells or sub-lets their property. These “event fees” are typically set at around 1% of the property sale price but may be as high as 30%.
Event fees can be a practical way of making retirement flats affordable, particularly for older people with low incomes, because they can defer the running costs until the property is sold. But owners and their families are often not told about the fees until after they have agreed to buy the property and, when they sell, they may be shocked at how high the fees can turn out to be.
In our consultation we are asking:
- should developers, landlords and managing agents of retirement flats do more to make potential buyers aware of event fees at an early stage,
- should this obligation be extended to estate agents, and
- how far can this be achieved through industry codes of practice?
We provisionally propose measures that developers, landlords and managing agents should take to make event fees more transparent, and asks whether the courts’ power to control unfair fees should be strengthened.
Stephen Lewis, the Law Commissioner for commercial and common law, said today:
“Older people are able to live independently in specialist retirement housing thanks to its design and the services provided on site. There are good reasons why they might want to defer some of the associated costs, and pay an event fee when the property is sold. But too many people are being taken by surprise by hidden event fees.
“With the number of people over the age of 85 expected to double in the next 20 years, we need more specialist housing for older people. Developers, landlords and all those who benefit from event fees must do more to make them transparent before the public loses confidence in this valuable sector.”
The consultation is open until 29 January 2016.