December 17, 2018

ARHM: This time the impetus to reform leasehold is serious …

Pictures from last year’s event

If there is one thing that those seeking reform of the retirement housing sector and those employed in it can agree on – actually there is rather a lot we now agree on – it is that this time the impetus for leasehold reform is different.

ARHM chair Richard Wheeldon made the point in his opening address to the conference on Tuesday in Stratford.

Mr Wheeldon, whose day job is with Housing and Care21, said that escalating ground rents, event fees and service charge disputes were mainly heard about in the retirement sector.

Now, the issue was widespread and general.

Andrew Bulmer, of the professional training body the Institute of Residential Property Managers, strongly emphasised that leaseholders are no longer powerless and uniformed.

Nor are they simply the cash cow for freeholders who employ the property managers. They need to be treated as customers and their rights are likely to increase.

Furthermore, they are increasingly organised. Mr Bulmer referenced the National Leasehold Campaign Facebook group, which is effectively the private forum for leaseholders compared with the public-facing leaseholdknowledge.com and BetterRetirementHousing.com websites.

It has 12,000 members and has been highly effective in mobilising politicians and media to address leasehold issues. 6,000 responses were made to the Communities Select Committee call for evidence on leasehold.

Mr Wheeldon said that whereas in the past it was retirement leasehold generating controversy – two Office of Fair Trading reports, for example – it was now the wider leasehold sector.

There was a danger that the good elements of the leasehold system – we are not sure what they may be – will be thrown out with the bad.

Other speakers did not appear to echo that fear.


Right to manage in retirement sites

Justin Bates, the barrister who has made a reputation frustrating right to manage applications in the courts on behalf of the country’s most controversial freehold owners and who is currently assisting the Law Commission in its review of right to manage legislation, felt the reforms of leasehold are piecemeal and fragmented.

See Elim Court here:

Elim Court: If you want right to manage, this is how NOT to go about it – Better Retirement Housing

Elim Court in Plymouth has escaped from its right to manage debacle by the skin of its teeth, having been led to near ruin by right to manage facilitators. After having had its right to manage application turned down in the lower tribunal (freeholder’s costs: £10,000) and then thrown out by the upper tribunal (freeholder’s …

What is really needed – he seemed to be arguing, or perhaps saying: what would satisfy people like us – is a thorough review of landlord and tenant law, after perhaps a three-year consultation, presided over by a politician determined to see through the changes.

He did not see any figure of stature on the political stage determined to do this.

But he did acknowledged the media and political interest in the subject, particularly aroused by the leasehold houses / doubling ground rent scandal that was brought to public attention by the Leasehold Knowledge Partnership.

On the other hand, he told retirement property managers: “It is vanishingly unlikely that the Law Commission proposals will make right to manage more difficult.”

Jeff Platt, of leasehold consultants Section 21 Limited, a judge on the First Tier Tribunal and an influential figure in the leasehold sector, said that right to manage applications in retirement often arose when rival firms urged the residents to dump their existing manager.

This was strongly disputed by Sebastian O’Kelly, of BetterRetirementHousing.com and director of LKP, who claimed this was not our experience at all.

It was certainly the case that the Right To Manage Federation, a controversial commercial outfit, urged RTM and then managed the sites through its associated company Team Property Management.

But that was some years ago.

Mr Platt also said that RTM was driven by the offspring of residents, or by younger retirees who then sought to reduce the services that a retirement site offers to save money, but to the detriment of the older residents.

This view received warm backing from the ARHM audience. But we are unsure what services are provided in retirement independent living beyond the house manager.

There is the issue of replacing the resident house manager with a visiting one, which is often put to a vote in retirement sites.

But this is often driven by the freeholder or FirstPort, at the sites it manages.

For reasons that have never been explained – and which almost certainly would have involved litigation in, say, a non-retirement London site – hundreds of house managers’ flats were issued with new leases in 2009 and then ownership transferred to FirstPort in 2012.

Here is an an example from last month of the freeholder / manager facilitating the ending of the live-in house manager service:

Loans were secured against this dubious portfolio which took Peverel / FirstPort out of administration after the implosion of the Tchenguiz interests in 2011.

Peverel Retirement up before the ARMA regulator before it can join ARMA-Q – Better Retirement Housing

A complaint about Peverel Retirement is being considered by ARMA regulator Keith Hill even before the trade body rules on whether it meets the criteria of ARMA-Q. The complaint comes from Alex Ellison, whose mother lives in Mere Court, in Knutsford, Cheshire. It concerns Peverel’s ownership and disposal of house managers’ flats.

Now Anchor wants to grab a £160,000 house manager flat … for £10,000 – Better Retirement Housing

After Campaign against retirement leasehold exploitation revealed that Hanover had sold 21 house manager flats, the cash-strapped Anchor is proposing to do the same. Residents at Welland Mews, in Stamford in Lincolnshire, were this morning asked whether they want to continue with a resident house manager as the post is vacant.

Hanover: 21 house manager flats sold ‘after taking advice’ – Better Retirement Housing

The Hanover housing association has no set procedure for selling off house manager flats at its 104 retirement sites. It has already sold 21 flats – more here. As leases vary, each site is assessed individually and advice is obtained, Hanover has told Campaign against retirement leasehold exploitation in a statement: “There is some variation in Hanover’s leases, because we have taken on responsibility for properties from other organisations.

The experience of BetterRetirementHousing.com is that retirement leaseholders only opt from right to manage in circumstances of extreme provocation.

There are certainly squabbles, but no RTM disaster that we are aware of.

The conference was given the example of Woodchester Valley Village

Woodchester Valley Village: How we turned a disaster into the first mutually owned retirement village – Better Retirement Housing

MPs were told yesterday of how residents took control of a bankrupt retirement village, raised £2 million and turned it into the first mutually owned retirement site in the country. Professor Peter Wilson told the Campaign against retirement leasehold exploitation / LKP roundtable, hosted by the charity’s MP patrons Jim Fitzpatrick and Sir Peter Bottomley, …

Here the residents actually bought the entire site off a bankrupt developer, finishing building it and now run it as a co-operative owned retirement site.

Several in the ARHM audience actually manage RTM retirement sites, and had direct experience of dealing with self-managing retirement sites.

None reported issues with RTM.


Ground rents and events fees

Justin Bates discussed the issue of ground rents, a hitherto sleepy area of leasehold.

Taylor Wimpey and other builders saw the opportunity to make money out of them, and have done so.

Government wants to keep ground rents with shared ownership – a flawed form of tenure in the opinion of just about everyone at the ARHM conference.

Mr Bates felt that the government plan to set ground rents as low as zero will be worked around, if developers are so inclined.

If they are to be banned, they would have to be defined. “There is no definition of ground rents. So, if there is one made there will also be loopholes.”

Mr Bates considered the Law Commission report on event fees, which would only require the Secretary of State’s approval to be enacted.

It backs event fees in retirement housing provided they are open and transparent and conform to a code of practice.

www.BetterRetirementHousing.com is more cautious of this business model, which does not require the Law Commission to endorse it.

Recent scandals in Australia have taken the gloss off event fees. It is also clear that the biggest paying event – resale – is the result of death, and that the more frequent those are the more profitable the retirement site. A cause for wry amusement, or alarm, depending on your views. 

But these are shark infested waters and best avoided by the donnish figures in the Law Commission.


Retirement resale values are not that bad

Jeff Platt, right, at last year’s ARHM meeting

Jeff Platt gave an interesting presentation addressing resale values at Burlington Court in Bridlington, which we reported in September last year and which was taken up by BBC R4 MoneyBox

www.BetterRetirementHousing.com reported here

Resale disaster zone: Burlington Court in Bridlington, where one flat has sold for £36,000 – Better Retirement Housing

5 flats sold for less than £50,000. 12 flats less than £60,001 The dismal state of retirement flat resales is starkly illustrated by figures from the Land Registry concerning Burlington Court in Bridlington. Five of the flats here have been sold for less than £50,000; seven of the flats have sold for less than £60,000.

He also referenced the Elderly Accommodation Counsel report into retirement resale values showing that 51% of retirement properties built and sold between 2000 and 2010, and then sold again between 2006 and 2016, suffered a loss in value of 17-25%.

Adam Hillier, of the EAC, is undertaking another study into retirement values based on the EAC database of 25,000 retirement communities.

At Burlington Court, Ken, 91, paid £180,000 in 2008 and says he would be lucky to get £70,000 today.

Mr Platt demonstrated that Burlington Court had to some degree followed the downward trajectory of resale prices in the wider Bridlington property market.

He attributed low resale prices generally to the vendors’ decision to sell quickly and move on, many being the heirs to apartments where service charges still need to be paid.

Sebastian O’Kelly pointed out that there were many other examples of dismal resale values in areas with more robust property markets than Bridlington.

Risingholme Court in East Sussex, for example, where a flat sold for £61,000 in 2015 after a fall in value of £164,000 in seven years.

Numerous examples of the retirement housing resale market are given here:

Abysmal retirement housing values revealed on the Land Registry – Better Retirement Housing

Campaign against retirement leasehold exploitation examines official re-sale prices for McCarthy and Stone, Churchill Retirement Living, Audley Retirement, Retirement Villages, Retirement Security, Anchor and Pegasus A dismal picture of retirement housing values on re-sales is revealed by Campaign against retirement leasehold exploitation from figures in the Land Registry.

www.BetterRetirementHousing.com has established that resale prices have fallen REPEATEDLY in subsequent sales, rather than just the price when bought new.

Another contributory factor, not mentioned at the conference, is when a house builder decides to sell off unsold stock at a discount, usually to a housing association. This resets all values downwards.

Retirement housing’s bad reputation

The UK retirement housing market is a sector seen to have potential growth, but suffers from a bad reputation.

Jennie Horton, of Hanover Housing, attributed this to leasehold and retirement housing issues specifically.

She urged a rebranding of UK retirement housing to grow the market.

Far fewer older people live in retirement housing in the UK than in the US, Australia or New Zealand, yet the older population is growing and is extraordinarily affluent owing to the increase in values in their freehold homes.

Interestingly, there was very little support for selling leasehold flats to people in their eighties and nineties at the ARHM conference.

Jeff Platt said “an alternative readily exists and it is called ‘renting’” .

Jonty Roots, of marketing company Boomer and Beyond https://boomerandbeyond.co.uk, said that 46% of those interested in retirement accommodation would consider renting, with 59% of their children thinking renting would be a good idea.

Justin Bates appears to support mutually owned co-operatives as the ideal for retirement developments, of which we are aware of only one: Woodchester Valley Village (see above).

Comments

  1. Right to manage in retirement sites
    Justin Bates, the barrister who has made a reputation frustrating right to manage applications in the courts on behalf of the country’s most controversial freehold owners and is currently assisting the Law Commission in its review of right to manage legislation.

    Mr Bates being a controversial choice by the Law Commission is like the Poacher turned Gamekeeper. He has an established “cottage industry” where he has been paid to thwart the Right to Manage (RTM) of many developments on technicalities. Does this say more about the Law Commission?

    Will the changes to come benefit leaseholds if he can sees the changes that are coming, and then use his expertise on behalf of the RTM developments seeing and being the part of the wind of change.

    As a barrister he can choose his workload, maybe in the future he may see more benefit from supporting the RTM as there will be a massive change as the leasehold laws begin to work more in favour of the leaseholder and not the wealthy landlords?

  2. Don’t forget to contribute to the Law Commission’s public consultation on what payment should be made to enfranchise a leasehold house or block of flats and for statutory leasehold extension for a flat.

    Lets all say 10 x Ground Rent charged in first year of the lease because the first buyers in the block of flats have paid almost the full cost towards the builders costs and most of the profit.

    Let each leaseholder send an individual reply to Law Commission so as to make it count up into big numbers.

    Pin a notice on the board at your local supermarket or at your office or at workplace or at your hospital and at your block of flats

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