December 17, 2018

Did government concession on ground rents stuff new thinking in retirement housing?

Was new McCarthy and Stone chief executive John Tonkiss was poised to unveil new retirement housing strategies, before government caved in over retirement ground rents?

The new chief executive of McCarthy and Stone John Tonkiss is delighted the government has caved in over retirement housing ground rents, while announcing strategic changes that were prompted by the prospect of this reform.

The company argued strongly in favour of ground rents because it was disadvantaged by having to provide communal areas at its sites, such as a lounge and kitchen.

But at the same time it was considering a future without ground rent sales to speculators: sales that have resulted in most of McCarthy and Stones freeholds being owned by the Tchenguiz Family Trust in the British Virgin Islands.

The issue of ground rents in retirement housing is strongly disputed, with trade body the Association of Retirement Community Operators claiming that they are not necessary or desirable.

Retirement community operators have a different housing model based on retaining the asset and managing it for the long term. Instead, of ground rents, ARCO strongly supports exit fees, usually meaning sale on death, which adds to the profitability of a site.

McCarthy and Stone was considering more imaginative alternatives to the ground rent sale model of a volume house builder.

The disadvantage is that the sale of the freehold introduces a third party speculator into retirement housing. But the advantage of ground rent sales to companies such as McCarthy and Stone is the immediate cash input used for future schemes.

“Challenging” year for McCarthy & Stone

Retirement housebuilder McCarthy & Stone has reported a 2 per cent rise in revenues but a 33 per cent drop in full-year operating profits in what it described as a “challenging year”. The Bournemouth-headquartered company turned over £671.6m for the year to 31 August 2018, up from £660.9m in the previous year.

John Tonkiss said: “We have proactively engaged with government over the last ten months on their initial proposal to reduce ground rent charges to zero to demonstrate how the retirement community sector uses fair and stable ground rents to fund the construction costs of its shared areas.

“We were therefore pleased to see that government is now proposing to allow the retirement community sector to continue charging ground rents after they are capped at £10 elsewhere. While the proposal remains at the consultation stage, this is a positive step for our customers and we will continue to work closely with government throughout the remainder of the consultation period.”

Mr Tonkiss’s statement was made as McCarthy & Stone reported a 2 per cent rise in revenues but a 33 per cent drop in full-year operating profits in what it described as a “challenging year”.

https://www.insidermedia.com/insider/southwest/challenging-year-for-mccarthy-stone

Insider Mediar reports that McCarthy and Stone turned over £671.6m for the year to 31 August 2018, up from £660.9m in the previous year.

Operating profits fell from £94.2m to £63.5m with legal completions falling by 7 per cent from 2,302 to 2,134.

McCarthy & Stone revealed a new strategy in September, which has resulted in one-off costs of £2m, with the company looking to find £40m cost savings by 2021 through “rightsizing” the operational base.

It is also looking to focus on its two core products, Retirement Living and Retirement Living PLUS, as well as improving its offering through increasing affordability, flexibility and choice.

Mr Tonkiss said:

“During the year, we conducted a full strategic review of the business and in September 2018 announced our new transformation strategy. This new strategy represents a significant shift in the business mindset away from growth and towards increasing our return on capital employed and operating margin.

McCarthy & Stone unveils new chief executive

The specialist housebuilder has appointed John Tonkiss as CEO as the company looks to focus on return on investment rather than revenue growth. Its new strategy will see McCarthy & Stone realign its workflow and cost base to deliver a “steady” volume or around 2,100 homes a year.

Challenging times for retirement builders McCarthy & Stone and Churchill Retirement

RETIREMENT housing giant McCarthy & Stone is expecting profits to fall by around a quarter, while its competitor Churchill Retirement has also seen a dip. Bournemouth-headquartered McCarthy & Stone said it had a “tough year” in the 12 months ended on August 31.

“Our focus now is on creating a more efficient business capable of delivering improved shareholder returns, while leveraging our longer term strategic opportunities. This includes increasing customer appeal by offering a broader choice of tenure options, as well as increased flexibility and affordable offerings.”

McCarthy and Stone full-year results to August 31 2018:

https://otp.tools.investis.com/clients/uk/mccarthy/rns/regulatory-story.aspx?cid=1223&newsid=1206954

Comments

  1. I believe government did cop-out on retirement ground rents.
    Government did caved in over Retirement Ground Rents, which vary from development site. The lobbying which McCarthy & Stone (M&S) undertook, may shows it might be possible (remember cash for questions) to hire MPs, but not possible to own one.​ We at Ashbrook Court pay Ground Rent of £48.00 a year, doubling next year to £96.00 a year and for what? ​

    This is how the Government allows the Leasehold Industry to manage:- ​

    Our Ground Rent goes to MB Freeholds Ltd. They purchased the freeholds of the 28 flats from Mercian Housing Ltd, who used Meridian Retirement Housing Services Ltd (MRHSL) as a Landlord. MRHSL sold the 125 year lease to Flatlaunch Limited, both were companies linked to Firstport Retirement Ltd, who have an Ultimate Parent Company known as Lightyear Estates Holding Limited and the Ultimate Holding Company is regarded as Euro Investments Overseas Incorporated in the British Virgin Islands.
    The Ultimate Controlling Party is the Tchenguiz Family Trust.​

    Was new McCarthy & Stone (M&S) chief executive John Tonkiss poised to unveil new retirement housing strategies, before government caved in over retirement ground rents, quite possibly?​​ The new chief executive of M&S John Tonkiss must be delighted the government caved in over the retirement housing ground rents, while announcing strategic changes that were prompted by the prospect of reform.​ M&S argued strongly in favour of ground rents because it was disadvantaged by having to provide communal areas at its sites, such as a lounge and kitchen, (this is stretching the truth).​
    .​
    Most of M&S who may have been considering a future without ground rent sales to speculators are also owned by the Tchenguiz Family Trust in the British Virgin Islands.​ Some Trade Bodies, Association of Retirement Community Operators (ARCO) claiming Ground Rent is neither necessary or desirable.​

    On stating retirement flats are community operators and have a different housing model based on retaining the asset and managing it for the long term, (also stretches the truth). It is not necessary for the sale of freehold that brings in and introduces a third party speculator into retirement housing. It is the Original Lease that sets up a Tripartite where there is a:- ​
    Freeholder (Head Lessor)
    Lessor (Landlord)
    Leaseholder (Us),

    So if developments are able to go for Right to Manage (RTM) the Landlord will still be the Landlord.

  2. They’ve let the retirement sector off the hook. For now. Maybe they pay better back-handers? Retirement housing are poor re-sale value, loaded with charges and nefarious maintenance opportunities. Many ground rents are £450 per annum.
    In contrast the local house builder built 3,000 homes, provided all the roads – adopted by the council, 2 children play areas and a small retail area – no ground rents of leasehold required. The cost was built into the sales price.
    McCarthy & Stone have left tens of thousands pensioner leaseholders in negative equity on the freeholds they flogged off to Fairhold.But their change of tact now is to provide care facilities onsite which is a boon for the government in solving a elderly care problem. People paying for their own care, in an ever increasing cost maintenance cost. Solves the inheritance tax issue as they wont have much money left no doubt.

  3. What happened to the posting on LKP, Katie asked “Please do not remove this review it is based on the truth” – Katie Kendrick – November 22, 2018 at 6:21 pm.

    Bellway had reported KKs Trust Pilot review claiming it contains language that’s accusatory or defamatory.

    I can honestly say I feel I was miss sold my house. The sales staff told me I could buy my freehold for a few thousand. Less than a year later the freehold was sold onto an investor which has a detrimental impact on myself and many thousands of families. I now find myself stuck in the complex web of leasehold and the complicated process of enfranchisment. This is not what I was led to believe. Now the price of my freehold has rocketed, as have the permission fees.

    chas says:- 23/11/2018 at 10:58 pm
    Katie,
    I believe you have been picked on as you have made the whole of leasehold aware of the way these large companies BELIEVE THEY CAN ACT without redress to their business model.

    They have picked on you because you placed your head above the parapet and began fighting for your rights. This is considered a threat to stop you saying/posting on websites and is meant to frighten you into stopping. Please do not stop fighting for the rights of Leaseholders who have been and are continuing to be cheated by Freehold Builders, Landlords and Managing Agents.

    This has been a common thread in Design & Build such as McCarthy & Stone who was the first in building Retirement Developments. They then sell the Freeholds before the two year period. The Freeholder was Fairhold (No7) Limited the company was previously known as McCarthy & Stone Investment Properties No 8 Limited, to which the Freehold Interest in the development was transferred in November 2003.

    The sale of a flat lease purchased in 2004 with a Annual Ground rent of £365.00 a year.
    The rent for the Residential House Managers Flat began in:- 2004 @ £9,469 and averaged out over the next 5 years at £8,954, where a basic similar flat could have be rented for as little as £6,000, they were paying £2,954 more, equivalent to 33%.

    This is the tip of an Iceberg of Leasehold and how the Retired Leaseholders are treated.

  4. Are these “reliable long term custodians of blocks of flats”

    Fairhold as a company were set up to transfer Freeholds from McCarthy & Stone and prevented residents purchasing the Freehold from the company they purchased from is this legal, what about the Right of First Refusal how does this square the circle, legally???

    This investigation took 3 years even with cooperation of Fairhold 26 different companies.

    Investigation into the transfer fee terms known as Exit Fees and used by the Fairhold corporate group in its leasehold retirement properties

    Case reference number: CRE-E/24874
    Case opened: June 2009
    Case closed: August 2012
    The fairness of Exit Fees enforced by Fairhold in leasehold agreements with tenants of its retirement home properties.
    law
    *Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs)
    *Consumer Protection from Unfair Trading Regulations 2008
    *Enterprise Act 2002.
    Case description
    As part of an industry wide investigation, the OFT investigated the use of Exit and Transfer Fee Terms by Fairhold in leasehold agreements with tenants of retirement homes held by Fairhold as freeholder. The transfer fee terms require tenants to pay one per cent of the higher of the sale price or open market value of their property in a number of circumstances, and represent an income stream to that landlord. They considered that the Exit & Transfer Fee terms were likely to be in breach of the UTCCRs.

    Although not the focus of the investigation, they also had concerns about the fairness of contingency fund fee terms that were generally drafted in a similar form to transfer fee terms. Contingency fund fees are paid into a fund to pay for the repair and maintenance of the development.

Speak Your Mind

*

Skip to toolbar