Elderly lead fight against freehold fees
Age UK says charge system is flawed but Government rejects reform. Alison Shepherd and Julian Knight report on a growing row
Sunday 03 October 2010
Thousands of older homeowners and their families are being "exploited by unscrupulous" firms demanding fees of several thousand pounds just for selling or sub-letting their retirement homes.
These exit or transfer fees, up to 5 per cent of an apartment's value, are charged to the 200,000 residents by freeholders and collected by their managing agents, ostensibly to cover changeover administration costs.
"It is quite outrageous that a freeholder can charge so much money for doing next to nothing," says Susan Wood, whose late father bought a home in a retirement village six years ago.
"I queried the transfer fee clause in my father's lease, and was told it was to enable the agents to vet incoming residents should my father sell. But how much can it possibly cost to check a person's passport or birth certificate? Certainly not the £1,115 we will be forced to hand over when the sale goes through.
The transfer fees are also charged each time the owner may wish to sub-let, as Esme Dando, the aunt of the murdered TV presenter Jill, discovered. She tried to rent out a unit for guests visiting other residents on her Weston-super-Mare retirement estate. "We bought a second unit on the site and were encouraged by other residents to set it up as a guest home," says Mrs Dando. "Then we discovered that each time someone came to stay – no matter how long for – we would be charged around £2,000, on top of all the other management fees and ground rent which we obviously had to keep paying, even when it was empty. It is ludicrous they can charge so much." Mrs Dando sold the second unit and was charged £1,390 in transfer fees.
Ms Wood, a founder member of Carlex, a group set up to offer help and advice to retirement-complex residents, is campaigning hard to get all such fees outlawed. "It is really unacceptable that these companies can get away with such exploitation of elderly residents. We need legislation and regulation."
Age UK has seen a worrying rise in complaints relating to transfer fees in the past three years. It too is lobbying the Government for changes in the leasehold law, although Grant Shapps, the Housing minister, has ruled any out, saying the "checks and balances in the system" were adequate.
Michelle Mitchell, Age UK's director, said: "We've seen cases of people being charged up to 8 per cent of the value of their homes when they come to sell or rent. Despite the Office of Fair Trading [OFT] finding this transfer fee to be 'unfair', agents continue to write it into contracts, taking advantage of an unregulated sector and many people's lack of access to legal experts in leasehold contracts."
The OFT investigation was launched last November following the high volume of complaints. It is due to report later this year, but campaigners fear that the industry will appeal any recommendation it might make on legislative changes, and it will be years before any real action is taken.
Bob Suvan, the chief executive of Blocnet.co.uk, a housing management agency, is also convinced leasehold legislation needs to change. "The root of the problem is that there is almost no legislation in this area. Many of the management agents treat their customers with contempt. Exit fees are the latest in a questionable line of service charges. Older people in particular are being taken advantage of: these people culturally can be trusting and they like to pay their bills. They don't like to be in debt.
"There needs to be legislation and a more robust code of practice that each management agent is signed up too. Customers should be allowed complete transparency and genuine punishment for firms that transgress."
The managing agent for Ms Wood's father and Mrs Dando's homes is Peverel, which is contracted by the freeholder, Fairhold; both companies are ultimately owned by a family trust which has connections with the property investor Vincent Tchenguiz, although a representative of Fairhold and Peverel said that "Fairhold charges transfer fees of only 1% in the great majority of cases".
"Prior to a lease being signed, purchasers of retirement properties will have been provided with both a service charge leaflet and a purchaser's information pack setting out the obligations of the transfer fee," said a Fairhold spokesman. "Purchasers will have taken their own legal advice on the purchase and the existence of the core term relating to the transfer fee. For the present and foreseeable future Fairhold has been advised that all parties to existing leases should honour the commitments."
James McCarthy of the Association of Retirement Housing Managers said he would not be advising members to withdraw transfer fees from lease contracts. "Transfer fees are a contractual obligation with the freeholder; managers are simply the freeholder's agent. Therefore it is not something that we have ever discussed."
But the companies will face a tough battle against determined residents such as Mrs Dando: "It is outrageous that we still have leaseholds. It is such an archaic system that allows people to take advantage of those who have chosen a retirement home because of the difficulties they may face with age."
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