April 22, 2024

Campaign against retirement leasehold exploitation tells Parliament: ‘feeling in retirement leasehold is that the bad guys always win’

Last Wednesday saw a session of Lord Best’s All Party Parliamentary Group on retirement housing and care.

Sebastian O’Kelly, trustee of Campaign against retirement leasehold exploitation / LKP, made the following points about private leasehold retirement housing to the APPG:

In part, the elderly are not downsizing to retirement housing because they think they will be cheated, and they have grounds to be cautious.

He referenced the two Office of Fair Trading investigations into retirement leasehold housing. One found exit fees on sale paid to the freeholder for no service whatsoever to be an “unfair contract term”, but did nothing about it.

The other OFT investigation found that Peverel, now renamed FirstPort, systematically cheated residents by handing lucrative contracts to its subsidiary Cirrus.

It got away with this scot-free, as did its then executives and two of the three stooge contractors, who simply went into administration and avoided fines.

Lord Best, heads All Party Parliamentary Group on retirement housing and care

Lord Best, heads All Party Parliamentary Group on retirement housing and care

Peverel was granted “leniency” for helping the OFT with its absurdly protracted inquiries and the only people threatened with criminal sanction were the pensioner whistleblowers, who were told by the OFT not to disclose the utterly feeble investigation to the press.

The full archive of this scandal is here

“There is a feeling in retirement leasehold that the bad guys always win,” Mr O’Kelly told the APPG.

He made other points:

“Why are retirement flats sold with 125 year leases? They won’t catch out the first owner or the second. But the third or fourth will have to extend the lease and if it goes below 82 years the value evaporates.

“Pensioners in their 80s and 90s do not want to think about extending leases, and the housebuilders who issued these leases know it.”

Mr O’Kelly acknowledged that McCarthy and Stone, since last summer, and PegasusLife are now issuing 999 and 1,000-year leases.

Then there are ground rents.

“Why are ground rents in retirement housing around £450? Because the housebuilder can get away with it.

“Ground rents of this level are seen in prime London. Why are they so high in retirement housing?

“If a housebuilder is issuing leases with high ground rents and only a 125 year lease, he is increasing the freehold value, which he can then sell off in addition to all the flats. It is the cherry on the cake.

“If you are lucky it will be bought by an insurance company; if you are unlucky it will be bought by a shark in the property auctions.”

Then there are re-sale values of retirement flats, which are frequently appalling.

Campaign against retirement leasehold exploitation referenced a case of earlier this week where after seven years an elderly woman living in a former McCarthy and Stone site in Stroud, Gloucestershire, is trying to sell her flat.

She bought it new seven years ago for £152,000 and had been trying to sell it for £125,000 since June last year. For the past month, she had reduced it to £100,000 and it was still not selling. What should she do, asked her daughter.

Every week Campaign against retirement leasehold exploitation is contacted with other similar cases. In this case, we advised the sellers to stick it out for a bit longer, as the family had already lost a third of its value.

General property prices in Stroud have increased markedly in this period.

The dismal re-sale values of retirement property – which have a serious impact on paying for further care, leaving aside family wealth erosion – is ignored or obfuscated by the retirement housing sector.

Until retirement properties track the local market, buying them is a lifestyle choice rather than a property investment with any likelihood of security.

Campaign against retirement leasehold exploitation pointed out that this aspect is ignored in many reports extolling downsizing.

The APPG also heard from delegates from PegasusLife, an upmarket retirement housing provider headed by Howard Phillips, a former chief executive of McCarthy and Stone.

To his credit, Mr Phillips ended exit fees (paid on sale for no service whatsoever) in McCarthy and Stone leases in 2008 just as the OFT began to investigate them. It was also a case of the company knowing the game was up.

The APPG was told that leases at Pegasus Life are for 1,000 years and that all sites have a management company where the residents own 49% of the shares.

Campaign against retirement leasehold exploitation welcomed these initiatives, although minority shareholders where a single shareholder owns 51% means they have little real power. Campaign against retirement leasehold exploitation also asked what were the typical ground rents at PegasusLife sites and whether freeholds were to be sold or retained. The representatives were not in a position to answer these points.

The APPG also heard from Nick Dykes, chief executive of the Belong group, a care provider rather than a housing provider.

It does sell some leasehold flats, but buys them back at the same price paid in a guaranteed re-purchase scheme. This is similar to the ExtraCare Charitable Trust, and is fine … in a period of very low inflation.

Campaign against retirement leasehold exploitation will consider the interesting submission from Belong in a separate article.

Campaign against retirement leasehold exploitation made the point that it is far more reassured by care providers providing housing than housebuilders offering care.

Care means management charges, and housebuilders have shown a consistent monetising approach to these over the past 30 years.

Hence the involvement of OFT, and courts.

The APPG also heard from residents at Ashfield, where the housing association Housing and Care 21 acknowledged failings and allowed pensioner residents to set up a company to run the site themselves.

That is discussed here


  1. Michael Epstein says

    Is it not also very disturbing that one of the largest retirement development managing agents in the UK applied to join ARMA in September 2014 and to this date ARMA have not felt it prudent to admit them as even associate members?
    How can residents have any confidence in the managing agent if the trade body doesn’t have any confidence in them?

    • Michael Hollands says

      On the 24 September 2014 Janet Entwistle announced to their one hundred thousand or so residents and to the outside world.
      Under the heading “First Port raising the standards with ARMA Q”
      “I am looking forward to our retirement business becoming part of ARMA, it will give our customers greater confidence and reassurance in their managing agent.”
      I assume that for the last 18 months the ARMA Board has been scratching their heads or they have just given up.
      I think all those residents Janet gave that promise to, deserve an answer. If First Port cannot reach the required standards then they derserve to know, and the reasons why.
      ARMA in this instance are being typical of many others in this industry by sticking their heads in the sand.
      No wonder all these retired leaseholders think the bad guys always win.

  2. Michael Epstein says

    Michael Hollands,
    It is not even as though Firstport Retirement are unable to meet ARMA-Q standards?
    it is the normal custom of ARMA to admit any company that does not meet ARMA-Q standards as an associate member and give them two years to come up to standard.
    ARMA will even send compliance officers to any companies that are struggling for whatever reason to assist them to become ARMA-Q accredited.
    Perhaps ARMA are taking the advice of a senior Firstport manager who in reference to not answering residents questions said ” IF YOU KEEP THEM WAITING LONG ENOUGH THEY WILL EITHER DIE OR GET DEMENTIA”

  3. Michael Epstein says

    It is not just a matter of 18 months and Firstport Retirement have not achieved ARMA-Q standards.
    They have not even been accepted as an associate member, which would allow them two years to achieve ARMA-Q accreditation.
    Residents do deserve an answer as to why this is the case. Or maybe ARMA are following the advice of a senior Firstport manager, who referring to giving residents answers said “If you keep them waiting long enough they will either die or get dementia”

    • Michael Hollands says

      I am getting worried that the members of the ARMA Board could die or get dementia before they come to a decision. 18 months of intense consideration of all the evidence must be reducing their life expectancy.

  4. Michael Hollands says

    I notice that the new CEO of ARMA has studied Zoology and has a Doctorate in Animal Behaviour.
    Probably the right man for the job.