The costs of a luxury retirement
For those who can afford it, retirement villages provide high-quality homes for older people who wish to live independently in a safe and comfortable environment. They also provide a range of leisure facilities and the opportunity to enjoy social activities within a community of people of a similar age.
While the number of people living in these types of developments is relatively low in the UK, the market is growing steadily and many more villages are expected to be built over the coming years.
However, properties in retirement developments are considerably more expensive than homes on the open market. Research by the real estate company Jones Lang LaSalle suggested that, on average, a retirement apartment in England cost around 17% more than a standard apartment of the same size in 2018.
There are also various fees and charges that can ramp up the costs significantly. We outline the main charges to know about below.
Maintenance fees and services charges
If you move into a retirement village you will be charged a regular service charge, which covers the maintenance of the development and its running costs. Research by Which? in 2020 showed that service charges typically range from £190 to £840 a month, depending on the operator, location and facilities on offer. Be aware that council tax and utility bills are paid separately and will also need to be factored into your budget.
Before buying a property, find out how the scheme is managed as this can affect your finances considerably. Some retirement villages are run by a residents’ management company or a Right to Manage company, which generally have lower service charges. If not, the management will be run by the freeholders, and residents will have little say on what they are charged for repairs and maintenance.
Also find out what happens about the maintenance fees and service charges if you die. Often, retirement flats go back on the market when the owner dies, but the service charges continue to be charged until the property sells. This can result in thousands of pounds of fees adding up while your relatives try to sell the property.
On a leasehold property, a tenancy is granted for a long period of time. It’s usual for leaseholders to pay a large amount upfront with smaller ‘ground rent’ payments to the freeholder annually. This may be as low as £50, but is usually around £300 to £500 a year.
Be aware that there have been some extreme cases where companies have increased ground rent by up to 90%, sometimes with very little notice. If you’re considering buying a retirement home, enlist the help of a solicitor to go through the terms and question how changes to fees and ground rent will be dealt with.
You can find more information about ground rent on Which? Money.
Event fees are some of the most controversial charges included in retirement property contracts.
Retirement properties are usually sold on a leasehold rather than freehold basis. The leases often require the owner to pay a fee for certain ‘events’, such as selling, sub-letting or transferring ownership of the property. These ‘event fees’ (also known as exit fees or transfer fees) are additional charges built into the lease that you would not expect to encounter with a standard property.
The fees are calculated as a percentage of the re-sale price or market value of the property. Fees can vary greatly – some schemes charge relatively modest rates of 1% to 3%, but other schemes have fees between 10% and 15%. In some cases, you'll face a higher fee depending on how long you have lived in the property. For example, an operator may charge an event fee of 1% for each year you live in the property, up to maximum fee of 15%. Some schemes have resale fees that can reach as high as 30% of the property’s value.
In the past there have been frequent complaints about hidden, complicated or excessive event fees in retirement property leases. An investigation into this practice by the Law Commission, which concluded in 2017, found examples of fees being hidden in complex leases or disclosed too late in the process. The Law Commission recommended that event fees be regulated with the introduction of a new code of practice. In 2019 the Government announced that it planned to implement most of the Commission’s recommendations; although by early 2021 this had yet to happen.
Since the Law Commission’s investigation many operators have taken steps to provide greater clarity over how their fees are structured and when they will apply. Nevertheless, residents or their families may still encounter unexpected or confusing charges, especially when it comes to selling a retirement property.
Make sure you are completely clear on these fees before signing any leasehold contracts, and compare the rates charged by different operators. Look out for companies signed up to one of the following Codes of Practice, which each contain provisions about event fees and are designed to give residents greater protection:
- The Association of Retirement Housing Managers (ARHM): Private Retirement Housing Code of Practice
- The Associated Retirement Community Operators (ARCO): Consumer Code
- National House Building Council (NHBC): Sheltered Housing Code.
If the lease has fewer than 80 years to run it will prove costly to renew and the property’s value will also suffer. Check the length of the remaining lease is acceptable before buying, always taking into consideration the length of time you could possibly be living there before the time may come to sell.
Read more information about leaseholds and when they should be extended on Which? Money.
Conditions of sale
When it comes to reselling a retirement property (usually when the owner dies or goes into full-time care), you will usually have a choice between using an estate agent or the operator’s own in-house sales service. Be aware that some freeholders make it a condition of sale that you must resell through their company, so check the terms before buying.
It may be an advantage to resell the property through the scheme operator, as they are experts in the market and may even have a waiting list of prospective buyers. However, as with an estate agent, you might need to pay a percentage of the sale price or a flat administration fee. Remember that the monthly service charge will need to be paid until the property is sold, so bills can mount up if a sale drags on.
Is a retirement village right for you?
For more information about what to expect from a retirement village, plus the 10 questions you should ask before choosing a retirement property, read our guide to the pros and cons of retirement villages:
Should you consider renting?
It may suit you better to rent a retirement property instead of buying one. Your rental costs usually include all services costs, ground rent and property maintenance fees, removing the worry about the upkeep of your home and its surroundings.
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