July 20, 2024

Exit fees: second response to Campaign against retirement leasehold exploitation from the OFT


Anyone having to pay stealth charge exit fees on selling – or letting – their retirement flat may wonder whether John Fingleton, chief executive of the Office of Fair Trading, is worth his £279,999 salary. The OFT has been written off as toothless several times. It obviously just hoped the retirement flat issue would go away.

We reproduce here the email received last night from Jason Freeman, Barrister, the head of legal at the OFT, basically stating that the Office of Fair Trading will not be ruling on the fairness of the contract terms of exist fees because they claim they somehow do not have the power to look at unfair terms in a contract!  It beggars belief and raises the question what is the point of the OFT? (Was it a naive assumption that the Office of FAIR Trading would be able to use the word UNFAIR? Jason did also tell me the name of the organisation is likely shortly to be changed. Reader suggestions needed please that I can pass back to Jason. We will load the best!)

It does appear as if the OFT was scared witless by the various landlords’ legal teams as the OFT advised nearly a year ago they were going to rule against exit fees, but suddenly held back their decision at the last minute after strong legal pressure from an “unknown” source. The only companies that have voluntarily stopped charging exit fees are McC and S and Churchill. Fairhold still charge 1% of sale value on exit, + 1% to contingency, + a Grant of Probate fee (this is scandalous – the executor has already paid to obtain this, and all they have to do is prove they have it), Pegasus charge 5%, Anchor sometimes charge 1% for every year of tenancy – this can lead to a 30% charge on exit.

Unfortunately the call from the OFT to me and this confirmatory and unsatisfactory email came through after the BBC interview was concluded, so I could not refer to it on the radio.  Another opportunity is going to present itself very soon though.

Dear Melissa,

Thank you for letting me know your concerns in relation to retirement home transfer fees today, and I am sorry that I am not able to be more open about the state of play in relation to our investigation. The OFT is subject to legal restrictions on what we can say about investigations, which means that we can come across as less transparent than perhaps individually we would like.

As I hope I was able to make clear, the OFT is not able to rule that a term in a contract is or is not unfair: only a court can make such a ruling. As a consequence, the likely outcome of our investigations are going to be one of the following: we conclude there is no problem, and close the case; we reach a voluntary settlement with the parties and publish the undertakings they give; or we issue court proceedings where we consider terms are unfair, and the parties are not willing to give satisfactory undertakings.

In the event that we take matters to court, the other side obviously has the opportunity to defend the case, and there is the prospect of appeals, not only to the Court of Appeal and Supreme Court, but also to the European Court of Justice on points of European law. It is difficult to predict how long such litigation will take in any given case, since this depends very much on the appetite of the other side in reality to appeal matters that they lose. However litigation is likely if there are any appeals to take quite a few years.

In relation to the retirement homes investigation, the current state of play is that we are in negotiation with a number of parties about changes they should make to the way they enforce lease terms and what future leases should include. In general the OFT tries to resolve matters through negotiation rather than litigation, but because of the practicalities of these discussions this can take some time.  In this case I am hopeful that we will reach the relevant agreements in the next few months.

You mentioned that you felt that the fact of the OFT investigation somehow impeded you from organising a class action. I hope I was also clear that I don’t see that there is any such impediment. Obviously any legal action you might take is a matter for you and you should obtain your own legal advice on it, but the Unfair Terms Regulations do make provision for individuals to challenge terms as unfair in court, and the court is able to make a binding ruling in relation to that contract. In some ways this sort of challenge is more straightforward than the sort of challenge that the OFT can bring, since the individual involved is able to set out all the circumstances of their own case. In OFT litigation we have to set out what we think happens in the typical case. You are also no doubt aware that individual tenants can in some circumstances challenge fees payable on assignment in the Leasehold Valuation Tribunal under the Commonhold and Leasehold Reform Act 2002, or in the County Court under the Landlord and Tenant Act 1927. However this could depend on exactly how the lease under challenge is drafted.

I hope this email is of some assistance.
Yours sincerely
Jason Freeman
Legal Director, Goods and Consumer Group, OFT