Beware retirement properties

“An investigation has exposed systematic ‘abuse’ in fees for retirement properties.

According to the Law Commission, which has just completed a two-year probe into the practice, retirement home residents are being charged ‘event fees’ triggered by one-off occasions, like sub-letting the property.

It warned that there are “major problems” with the way these fees are charged – and how they are hidden in the small print.

When older people buy a retirement property, it is generally on a leasehold basis. My own grandfather lives in a lovely complex just over the road from my parents.

As with normal residential leasehold properties, there is a host of additional fees to worry about, and they come with all sorts of names – exit fees, transfer fees, contingency fees, etc.

And according to the Law Commission they are open to abuse. Its investigation found that these fees can be hidden within the small print of complex lease documents, or are disclosed too late in the process for the buyer to take them into account.

Bad timing

There is also a significant issue about exactly when these fees are charged, which the Law Commission said may come as a “surprise” to the owner because of how broadly drafted the fee is.

For example, it is reasonable to expect that an event fee might be charged when you sell the property.

But the Law Commission’s investigation found numerous examples of the fee being charged when the property was inherited or mortgaged, when a spouse, partner or carer moved in, or when the normal resident moved out.

These fees aren’t small change either – they can work out as much as 30% of the property’s value!

What’s most irritating about all this is that it is nothing new. Back in 2013 the Office of Fair Trading (remember them?) also looked into the issue, and found the exact same problems, suggesting that a number of the fees being charged were unfair and actually a breach of the Unfair Terms in Consumer Contracts Regulations.

Yet here we are, four years later, and the same fees are being charged, hitting older people in the pocket.

Hurting the supply of retirement homes

These fees are bad enough just from a moral point of view, but some believe that they are actually serving as a barrier to more retirement homes being built.

Nicola Charlton of law firm Pinsent Masons suggested that the “legal uncertainties” over the status of event fees “have in the past dissuaded developers from building the homes older people need and investors from providing the required funding”.

Now that the Law Commission has published its views on the fees, this uncertainty is removed, which could possibly mean extra investment of as much as £3.2 billion into new – and badly needed – specialist retirement housing.

There are currently only around 160,000 retirement properties like those reviewed by the Law Commission, which simply isn’t enough.

Is regulation the answer?

The Law Commission has declined to call for event fees to be scrapped entirely, as it argues that they can actually make specialist housing affordable precisely because some of the payments for services are essentially deferred until the property is sold.

Instead, it wants regulation with the introduction of a new code of practice overseen by the Department for Communities and Local Government.

This code of practice would limit when a fee can be charged, and in some cases exactly how much can be charged.

It would also impose “stringent obligations” on landlords to provide transparent information about exactly which fees may be charged early in the process.

This idea has had a warm welcome from the industry. A statement from the Associated Retirement Community Operators said: “It’s been long overdue, and we believe that an event fee that has not been transparently disclosed should not be charged.

In other countries, event fees are a well-established mechanism that can enable older people to use their housing equity to ‘enjoy now and pay later’, for example by reducing their service charge or deferring some of the costs of building communal facilities.”

However, the Campaign Against Retirement Leasehold Exploitation (CARLEX) described the report as “tokenistic”, adding: “Pensioners and their families who feel they have been blatantly cheated in retirement housing have reason to feel let down.”

What to consider when buying a retirement property

Clearly, if you are thinking about buying a retirement property it pays to look carefully through the contracts to ensure you fully understand what fees you are likely to have to pay and precisely when they may be charged.

It isn’t just these event fees you need to consider either – there will also be service charges to cover maintenance and upkeep of the property to account for. These are often higher than the service charges you may face on a normal property, as retirement homes tend to come with more services included.

Critics claim that the managing agents and maintenance firms are often offshoots from the freeholder, meaning there is no actual competition for the role, resulting in eye-watering overcharging.

It also pays to do your research on the resale value. Have similar retirement properties in the area been resold at a decent price?

These properties can be more difficult to sell than a normal home, while you will want to check the small print of your contract to ensure you are free to choose who you market the property through – some freeholders insist that you resell it through their own company, with a higher fee to pay than selling through an estate agent.

Given how difficult it can be to resell a retirement property, you may prefer to rent instead.”

http://www.bbc.co.uk/news/uk-politics-39678859

More than 200,000 homes empty in England worth more than £43m

“In England there are 200,000 homes that have been sitting empty for more than six months, according to new Government figures. This is equivalent to £43bn worth of housing stock.

In London alone there were 19,845 homes sitting vacant for over six months last year, property that is worth £9.4bn, taking into account average prices.

Kensington and Chelsea has the capital’s highest number of homes which are vacant for more than six months with 1,399 empty, up 8.5pc on last year, and 22.7pc higher than 10 years ago.

This is likely due to the buy-to-leave phenomenon, where wealthy buyers snap up homes as an investment, and leave them empty while waiting for its value to increase.

Communities secretary Sajid Javid downplayed the role of such foreign buyers in exacerbating the housing crisis, saying the problem “isn’t as bad as some people think”. A Savills’ report found that the majority of homes bought by people based overseas were being rented out, rather than left empty. …”

https://t.co/8GXETMiUXs

Persimmon non-payment for 3 years may lead to loss of bus service

Owl says: if a developer has not kept its side of a bargain and ows money or in-kind payments, with a planning application, surely it should not be allowed to submit further planning applications till the debt has been fully discharged (with appropriate interest).

“The future of a vital bus route could be placed in jeopardy. Persimmon Homes South West has built 334 new homes at Mile End on the Ashburton Road on the A383 at the edge of Newton Abbot, and as part of the planning agreement for the scheme, they would help to fund the number 88 bus service that runs between Newton Abbot and Totnes, via Buckfastleigh, and travels on the A383 Ashburton Road,

But, the developers have been accused of not paying those contribution for 2015, 2016 and 2017 – a total of £225,000.

Teignbridge Council have commenced legal proceedings against the developer to ensure all the signed contributions are met.

But there are fears that unless the developers pay up, the bus route could be placed in jeopardy as there could be no funds for it.”

http://www.devonlive.com/south-devon-bus-service-under-threat-as-developers-have-not-paid-contributions-for-it/story-30282913-detail/story.html

Useful case law on sustainability

“A judge has dismissed all seven grounds on which a developer sought to challenge the Community Secretary’s decision to reject a planning inspector’s recommendation.

The case concerned Arun District Council’s refusal to grant permission to developer Keith Langmead to build 100 homes at Yapton, West Sussex.
An inspector recommended that Langmead’s appeal be allowed, but this was overturned by the Secretary of State.

Giving judgment in Keith Langmead Ltd v Secretary of State for Communities and Local Government & Anor [2017] EWHC 788, Mrs Justice Lang noted the Secretary of State had concluded the appeal did not accord with either the overall local plan or Yapton’s neighbourhood plan.

Arun lacked the five-year supply of housing sites required by the National Planing Policy Framework (NPPF) and so could be liable to the presumption in favour of sustainable development.

But the Secretary of State concluded that the proposed development did not comply with the social element of sustainability, and the “adverse impacts of this proposal would significantly and demonstrably outweigh the identified benefits”.

Langmead appealed on the grounds that the Secretary of State misunderstood and misinterpreted the NPPF, failed to apply it correctly, failed to take into account the independent examiner’s reservations about the Neighbourhood Plan and made a decision internally inconsistent with regard to the weight given to the local plan.

The company also argued that the decision was irrational and failed to give adequate reasons.

Lang J said the Secretary of State’s decision “did not disclose any misinterpretation or misapplication of the NPPF”, while it was unlikely that any material change came to his notice at the right time.

The inspector’s view had been incorporated and the Secretary of State “disagreed with the inspector’s conclusions, as he was entitled to do”.
Langmead had obtained by disclosure a copy of the internal planning casework division (PCD)’s submission to the Secretary of State to allow the appeal and while the decision letter did not mention this “it seems very unlikely that the Secretary of State failed to consider it, since an internal submission of this kind would usually be a helpful starting point for the minister”, the judge noted.

She said: “Although this appeal was controversial, it was not especially complex, in fact or law. The reasons in the [decision letter] were adequate and intelligible.

“In my view, the claimant knew full well the Secretary of State’s conclusions on the principal important controversial issues. Its real complaint was that the conclusions reached were unreasonable and misguided.”
The judge added: “The Secretary of State was entitled to make up his own mind, and reach a different conclusion to that of the PCD and the inspector.”

http://localgovernmentlawyer.co.uk/index.php?option=com_content&view=article&id=30835%3Ajudge-dismisses-challenge-after-minister-rejects-recommendation-of-inspector&catid=63&Itemid=31

Council development gain mechanism flawed says RTPI

“The methods used to capture development gain for local communities are inadequate, the Royal Town Planning Institute (RTPI) has said.
It has commissioned research to see how the section106 and community infrastructure levy (CIL) regimes compare to alternatives used abroad to capture the uplift in land value resulting from planning permission or public investment on or near a piece of land.

CIL was found ineffective by a working group that reported to ministers in February.

The RTPI’s project will compare the current mechanisms with a simple tariff mechanism and two variants of the impact fee approach used in North America.
Each approach’s ability to raise money, and its attractiveness and ease of implementation will be tested via interviews with planners, planning consultants, lawyers, valuers and developers.

RTPI president Stephen Wilkinson said: “Infrastructure is critical to housing delivery and economic growth. At a time when public finance is squeezed we have to look at new funding models to ensure infrastructure can be built at the speed and scale we need.

“We are missing a trick by not accessing the vast potential of rising land values which currently go directly to landowners. Rising land values are a reasonable place to look for infrastructure funding and international evidence suggests there are fairer, more effective ways of sharing this gain.”

He said the present methods successfully clawed back some uplift but did not allow “local authorities to be proactive by using rising land values to fund land assembly and deliver housing”.

http://localgovernmentlawyer.co.uk/index.php?option=com_content&view=article&id=30817%3Amethods-for-capturing-development-gain-qinadequateq-says-rtpi&catid=63&Itemid=31

Councils as developers

Extracts from two letters in the Business supplement of The Sunday Times:

“… councillors think they know the property market but they don’t have a clue. They now plan to build a new Town Hall (in Tunbridge Wells]. This is an enormous ‘folie de grandeur’ that will leave taxpayers on the hook.

Tunbridge Wells has a town hall, but it has been allowed to fall into disrepair. Was this part of the plan?”

and

“… in Dover, the town clerk and the mayor have set up a charitable company, LoveDover Regeneration, using £350,000 of taxpayers’ money for property development.

Although it is a charitable company, under normal rules this means the directors own the company, hence the company owns any property it buys, not the council. Further, the £350,000 is equal to almost 50% of Dover Town Council’s annual income.

The money has been justified as it comes from the reserves, but surely the idea of passing large sums of money to a body over which Dover Town Council has no control, for property development or any other use, is not acceptable.”

2-year old bottles of urine found behind bath in Bovis home at Cranbrook

Mandy Greeves, 50, found three bottles of ‘urine’ stashed behind a bath panel at her house in Cranbrook, Exeter.

A resident of a new build home was horrified to discover bottles of suspected urine hidden behind a bath panel – nearly two years after she moved in.

Mandy Greeves, 50, says she is grateful now that the containers of yellow liquid have been removed by Bovis Homes , which built her property.

The ‘disgusting’ discovery came to light when Mandy called a plumber friend in to repair a tap at her house in Cranbrook new town near Exeter, Devon.

When the plumber removed the bath panel to fix the problem he discovered three plastic bottles full of a yellow liquid underneath the bath.

The bottles had been covered up by the panel.

Mandy was baffled. “I looked at them, and I thought, ‘Oh my god’. First of all I thought was it milk that had been left there? But it wasn’t.

“You could see that it was urine. I was disgusted. It was just horrible. I couldn’t believe that someone could leave something like that behind.

“I thought, do I throw it away or do I keep it? Then I thought, if I throw it away, I’ve got no evidence.”

Mandy told her friend to put the bath panel back on so that there was evidence to show Sovereign Housing which co-owns the house, and Bovis Homes.

Mandy is the house’s first occupant, and moved in to the property in July 2015.

One of the bottles is dated March 15, which, says Mandy, would tally with the house’s interior being fitted.

“I can’t understand a human being being like that,” said Mandy.

“If they want to go to the toilet, why can’t they do it in the garden? The lawn wasn’t down by then it would have just been mud.

“Why did they have to do it in a bottle and leave it and then put the bath panel back on? It might have been the builders. The guy that put the panel on. Why did he not notice it? It’s not nice.”

A Bovis Homes spokesperson said: “Our regional customer care team were not aware of this matter but now it has been brought to their attention they will contact Sovereign Housing immediately and investigate this situation further.”

http://www.mirror.co.uk/news/uk-news/homeowner-makes-disgusting-discovery-bathroom-10220768