July 21, 2024

Family hit with £9,341 contingency fee charge on Anchor’s Cherry Trees flat …

… that’s on top of a £26,950 fall in value after 11 years of ownership


A family whose parents owned a one bedroom flat at Anchor’s 59-unit Cherry Trees site in Redcar, Cleveland, have been hit with a double whammy common in retirement leasehold.

First, the flat for over-55s was bought for £79,950 in 2004 but sold last November for 34 per cent less: £53,000.

So far, so normal: retirement flats are the single worst performing residential asset it is possible to purchase in this country and they frequently bear no relation to the local property market.

But the Matson family were also mortified to receive a £9,341 demand for the contingency fund based on 11 Years 4 months of ownership.

The figure is calculated on a charge of 1% of the purchase price, not the price achieved on re-sale.

Additional feelings of grievance arise because the Matsons’ father died on January 5 2014 and the flat has been vacant ever since. So while the flat languished on the market, falling in value, the contribution to the contingency fund went up.

Cherry Trees as advertised by the Elderly Accommodation Counsel

Cherry Trees as advertised by the Elderly Accommodation Counsel

Peter Matson told Campaign against retirement leasehold exploitation:

“I am aware of recent cases the OFT have disputed with McCarthy and Stone and Fairhold regarding such exit or reserve fees and its recommendation is that any such fees be based on ‘market value’ and not the original purchase price.

“Is there any future proposal to cancel all such exit fees altogether by the Law Commission and would that in any way be retrospective if all correspondence was kept?”

The Matson’s believe the clause in the lease is an “unfair contract term especially if it was not specifically advised at time of purchase to my ageing parents or alternative payment arrangements proposed by Anchor”.

The Matson’s did not use a solicitor recommended by Anchor to purchase the flat.

Anchor has provided Campaign against retirement leasehold exploitation with a full and lengthy reply. The leases at Cherry Trees were varied in 1991 when the then residents agreed to introduce the contingency fee clause to the lease rather than contribute via monthly service charges.

Anchor points out that it can use surpluses in the contingency, or sinking fund to offset the monthly service charges. Residents have benefitted from this by about £80,000 in the last two years.

LKPnewsletter3Anchor does not agree with the Matson family’s view that the contingency fees are an unfair contract term.

“Our experience to date is that leaseholders prefer to contribute to the sinking fund via ‘event fees’ paid on a disposal of their property rather than through the service charge.

“If, however, a majority of leaseholders indicated that they would prefer to make regular contributions to the sinking fund via the service charge we would be happy to explore with them how we could best accommodate that preference.”

Anchor also referred to Campaign against retirement leasehold exploitation pointing out that McCarthy and Stone had varied its requirements to contribute to the contingency fund on subletting, after we had taken the issue up with the company.

‘As far as I am aware, Anchor has never sought to require a contribution to the sinking fund on a subletting,” reads the letter from Anchor company secretary David Edwards.

However, the one point not addressed by Anchor is whether the contingency fund “event” fee should be based on the price paid for a flat or the price sold.

Campaign against retirement leasehold exploitation has never had an issue with contingency fund exit fees in principle, but when a retirement flat plummets in value it is unsurprising families feel bitter.

The full Anchor letter is below, as is the relevant part of the deed of variation (click to read).





  1. Michael Epstein says

    Possibly a little controversial, but here is my idea.
    I can see the merit of contributions to reserve funds being made on a sale of a retirement property. It does reduce monthly costs. In effect it should be seen as similar to a balloon payment for a car purchase plan.
    However, instead of a percentage on the purchase or selling price, it should be a percentage of the service charge. Perhaps 5% . Leaseholders at the time of purchase could chose whether to pay a higher monthly service charge, or defer part of it until the sale?
    Not only would this make charges much clearer, but it would also reveal the genuine service charge attached to the property and would lead to leaseholders putting managing agents under proper scrutiny?

    • Michael Hollands says

      I agree with you there, it should be based on a percentage of the actual service charge for each year the leaseholder has been in residence. And because each years service charge and the number of years residence for each resident would vary, a detailed and accurate account should be produced.
      This is the only fair way to calculate it, all other broad brush methods will have a bias towards the freeholder.

  2. I certainly have issues with paying into the contingency fund Many people have to sell because they need to go into a nursing home or they have found the management of the property difficult and their life made unbearable so have no choice but to move out all this cost a great deal of money through no fault of their own so why should you have to leave money behind for other people to waste House Managers love saying don’t worry that can come out of the contingency fund so he or she has a free hand to use it People who have to go into a nursing home still have to pay their service charges even when they are not getting any service, many have their home up for sale for years and are forced to sell at a loss of between thirty and fifty thousand If you sell any other property you are not expected to pay to get out The government are keen for the aged to downsize but do very little to make sure they are not being exploited Ban all exit fees Ban all retirement leasehold property and make all retirement apartments commonhold

    • Campaign against retirement leasehold exploitation says

      The alternative is you make your contribution to the contingency fund in addition to service charges every month.

      Of course, in the case of Peverel / Cirrus price-fixing scandal, it was sites with large contingency funds which were deemed to be needing improved door entry systems etc.

      • Campaign against retirement leasehold exploitation, you say that it was sites with large Contingency Funds (CF) which were deemed to be needing improved door entry systems etc.

        Surely this was decided by Area Managers, who would provide the information to the Technical Managers and increase the CF to match the costs that would have already been worked out as they were Price Fixing between 2004 and late 2009.

        65 developments were forced to replace WCS and Fire Systems even those that worked properly. If one checks the Price Fixing it was also Area Controlled.

        Not all of the 5 Regions were targeted so how do you know it was only sites with Large CF?

        Can you be more explicit regarding the knowledge you have regarding the Price Fixing?

        Also our AM increased our CF to make allowance for the replacement WCS 15 months before our Warden Call System was replaced.

  3. G Farley,

    Each site should have a “Development Guide” which is kept in Communal Lounges or in the House Managers Flat. There is a list and a A4 sheet that gives a list of all that is required which will be available for the information of all residents. It states as I have said:-

    “The Guide will be held in the communal areas of your development” your House Manager can tell you where it is.

    Each Development Guide had a list of 16 items that are kept in separate folders for ease of access.

    Within this Development Guide should be the following:

    1.Copy of the Lease
    2.Purchase Information Guide (PIG)
    3.ARHM Code of Practice
    4.Residents Charter
    5.Peverels Complaints Procedure
    6.Residents Association Information /Draft Constitution
    7.Building Insurance Policy 9Extract from HM Sickness Policy Schedule
    8.Certificate of Insurance
    9.House Managers Job Description
    10.Budget Headings – General Information
    11.Fire Procedures (Advisory Notes for Residents)
    12.Management Service Book
    13.Asbestos Notes
    14.Information on Permission Requests
    15.Guidance to Residents notes
    16.Administration of Major Works and Redecoration.

    I hope this helps and inform me if you have one at your Development.

  4. The development guide that you mention was taken away when Peverel left our development I wrote to McCarthy & Stone Management in January 2015 and received a letter saying they had no intentions of replacing this file, so the rules change to what the Area or House Manager wants

  5. G Farley,

    If I was to send you copy’s, what could you do with them?

    • Mr Williamson says

      Chas. can you tell me is it a legal requirement to have a development guide, also as a member of RTM company are we entitled to see our House Managers Job Description, when Peverel left they took all information, the new Managing agents refuse to provide a Management Guide but when they took over they told us they had their own but 3yrs later they still refuse to provide any information what so ever, please could you provide me with any information.

      • Mr Williams, when a flat is purchased you are provided with your Lease, (a contract), this contract is Expressed in writing.
        A contract also has Implied Terms, those that are mentioned, and may not be in writing, but are stated to you, which are designed to promote sales of goods.

        Development Guides (DG) are Expressed Terms in that they provide additional information that relates to your lease.

        The information provided to you can be verbal, relating to the DG which is then Implied Terms and its purpose is meant to provide additional information which is then part of the Contract.

        The DG are in fact a part of the Contract, but by removing them the Managing Agent (MA) has created a Breach of Contract where they have Unilaterally changed the contract conditions.

        They are allowance for change within a contract but it MUST be Bilateral, which means that the change has be accepted by the two parties involved.

        My view is that the MA has Breached the Contract.

        The reason the Development Guides were removed was because they are Implied Terms which can be used in a court of law, that provides information that is used to embellish the flats that are for sale.

        * When did you purchase?
        * Who are the Freeholders?
        * Who are the Landlords?
        * Who is the Managing Agent
        * Who is the Area/Regional Manager
        * What is the Post Code.

        You are entitled to see the HM Job Description which was part of the DG.

        Ask admin for my email?

  6. Mr Williams,
    Further to my last posting the DG if used to sell or provide additional information, this may be both Expressed if you have seen a copy of the Guide. If you were informed of what the DG was for, without seeing this document, it is still an Implied Term within the contract.