May 22, 2024

Law Commission’s tokenistic report helps retirement house builders and freehold investors, not families needing to house a relative

Only 2 per cent of UK over-65s live in specialist retirement housing – against 12 per cent in USA and 17 per cent in Australia – and there is no reason for more to do so because of today’s report from the Law Commission.

It does not address the scandals of the retirement housing sector, which make it such a disastrous choice for many families.

You can see on the Land Registry the wealth erosion of retirement housing in the abysmal prices paid for resales here:

Abysmal retirement housing values revealed on the Land Registry

The Office of Fair Trading twice investigated retirement housing.

On exit fees payable on sale, the OFT said in September 2012 that they were “likely” to be an unfair contract term. (The Law Commission absolutely refuses to reference this.)

McCarthy and Stone dropped these exploitative lease terms in 2008 because the OFT was investigating.

Thanks to the Law Commission report, it can now reintroduce them so long as they are “transparent”.

Retirement housebuilders have been given the green light to load exit fees – and other monetising lease terms – rather than address the more robust and useful inquiries of the defunct OFT.

This means more fees payable to freehold owners, such as the Tchenguiz Family Trust in the British Virgin Islands (which unaccountably still owns the old McCarthy and Stone freehold portfolio).

The other OFT investigation ruled in December 2013 that the largest property management company in the country Peverel – now renamed FirstPort – systematically cheated pensioners with a bogus tendering process for electronic door systems.

More here:

These were the circumstances in which the Law Commission was tasked to consider exit fees.

Instead of trying to address these serious failings, it has lent its efforts to untested business models from housebuilders in the sector that load fees at the end of occupancy – ie at sale. It has been assured that these models work just fine in other jurisdictions.

Couple these fees with the revenue earning potential of opaque leasehold terms, and it is hard to see how the Law Commission has done consumers many favours.

It is mildly good that, for example, Barchester retirement housing, which takes a 10 per cent exit fee on sale and 50 per cent of any uplift in value, will have to make these conditions more transparent (because they are nowhere to be seen on its publicity material at present).

We should welcome officialdom’s efforts to address society’s unfairness, when it is genuine.

The Law Commission report on exit fees is tokenistic.

Pensioners and their families who feel they have been blatantly cheated in retirement housing have reason to feel let down.

Sir Peter Bottomley MP and Jim Fitzpatrick MP, the patrons of LKP / Campaign against retirement leasehold exploitation, concluded that the interim report was “a backward step”. So it remains.

The full report is here:

Event Fees in Retirement Properties


  1. Michael Hollands says

    I notice that one of the Law Commissions recommendations is that the freeholder must explain the reason for the chargeable event.
    IE. What service is provided or benefit is derived for the receipt of this fee.
    A few years ago I contacted Fairhold, to ask them this exact question. After many repeated requests I finally received an answer.
    Which was that there is no service or benefit provided and the Chargable Event (which in this case was the Exit Fee) is charged because it is a condition in the Lease.
    So if the Government accepts and implements the Law Commission report does this mean that in a case like this the Event Fee can be challenged.

  2. Paul Joseph says

    Law Commissioner Stephen Lewis was clearly immensely influenced by one consideration to which I believe he gave overriding concern: the desire of an elderly person to live in peaceful, worry-free retirement on a fixed income. It’s a reasonable aspiration which can be afforded much sympathy. The ability to defer all variable costs to one’s estate is valuable.

    However, what has clearly happened is a market failure, with predators taking advantage of this legitimate aspiration of elderly and often vulnerable (and sometimes headstrong!) people.

    It was also very clear that the terms of reference were crafted very tightly to keep the Law Commissioner on a very narrow track indeed.

    What a pity that there is so little tradition of class action law suits in the UK. It seems that it takes front page stories of scandals resulting in deaths for things to change. Olive Cooke, the poppy seller who threw herself from Clifden bridge; Milly Dowler; Irene Cockerton; etc. all led to cries of “Something must be done!”

    But looting the estate of someone who’s already dead? Well, it’s nice work if you can get it. No pockets in a shroud, and the victim won’t be giving any interviews; lovely jubbly eh?

    As has been pointed out on this site before, the people who die with enough to leave an inheritance to loot are, for the most part, Conservative voters. Most of the country’s retirement housing is in Conservative constituencies. A country that works for everyone, not just the selected few?

    Right now the Conservatives are ascendant because the opposition is so feeble. Nothing like this lasts for ever. Someday there will be a pendulum swing against this kind of injustice and the scale of it will be influenced by the extent to which the Conservatives fail to respond to the market failures and injustices that are plainly visible to all who care to see them.

  3. G Farley says

    I was very disappointed withe the outcome of the Law Commissioner’s report and felt it was bias towards the developers who of course can afford good PR Men.

    I attended the Law Commissioners meeting at Portcullis House and felt it was not a good choice to have the main speaker who was an Ambassador for Churchill Retirement Living and the other speaker was very friendly with one of the McCarthy & Stone representatives saying how she knew they were always transparent with their clients.

    Many people are forced to sell their property at a loss due to ill health or problems with the management company.

    Service charges are paid each month so why should they be forced to pay an exit fee fee or money into the contingency fund for the upkeep of the property.

    It is more likely that the people who do not need to sell are in a better financial position to pay for any upkeep. Because such charges are made many elderly people will have to rely more & more on social services for funds.

    It is a great shame that more thought was not given to the elderly who it affects

  4. G Farley says

    I was recently told by someone selling a property managed by FirstPort (ex Peverel) that they now charge a 1% entrance fee to buyers Is this true?