June 17, 2024

Campaign against retirement leasehold exploitation meets McCarthy and Stone, but let’s talk about making the leases fair

McCarthy and Stone’s lavish HQ in Bournemouth. The company is heavily indebted to its bank, HBOS


Campaign against retirement leasehold exploitation has declined this afternoon to participate in talks over a new consumer charter with developer McCarthy and Stone – but is quite happy to discuss more substantive matters.

The offer was suggested at an informal, agenda-less meeting in which several issues were raised between Sebastian O’Kelly and the new company secretary John Davies in central London that revives dialogue between the two organisations.

“Campaign against retirement leasehold exploitation recommends that pensioners do not buy retirement leasehold at all, so we can hardly get involved in a consumers’ charter,” said O’Kelly, who raised no objection to the request that the meeting be reported on the McCarthy and Stone website. “Without singling out any developer, managing agent or housing association, the sector is characterised by onerous and unfair leases – hence the Office of Fair Trading inquiry into exit fees – and predatory property management, as has been confirmed repeatedly in open court.

“The sector is in crisis and the sticking plaster of another ethical charter is unpersuasive. Peverel is on its second declaration of good intentions so far this year with – presumably – a third one coming along shortly in the form of the ARMA-Q initiative.”

Instead, Campaign against retirement leasehold exploitation suggests that all retirement developers simply provide decent homes for the elderly at a decent price, and stop trying to add additional income streams exploiting the opportunities of leasehold tenure.

But they prefer three bites of the cherry – the initial sale, the subsequent management contract and flogging off the freehold. (This is leaving aside other earners such as buying within a part-exchange scheme – which no Campaign against retirement leasehold exploitation reader should EVER consider doing.)

Instead of a consumer charter, McCarthy and Stone should consider:

Build commonhold developments, so that buyers are immediately empowered. All the residents have to do then is not fall out among themselves and get some property managers in.

Ensure that there is a residents’ management company of all leaseholders that immediately takes over control of the building on completion. This means there would be no need for a subsequent right to manage action. This arrangement is widespread on non-retirement schemes.

Davies, who joined the company in August, pointed out that McCarthy and Stone has managed its own new sites with its internal property management service since 2010, no longer uses the services of Peverel and does not apply exit fees at freeholds that it still owns even though they are in the lease (that McCarthy and Stone drew up).

In all subsequent freehold sales it will control the headlease,  which will ensure that it appoints the property manager. This measure is to protect McCarthy and Stone from suffering reputational damage because of bad management.

But this is not convincing.

In the early 1990s McCarthy and Stone had an internal property manager. It was called Peverel and its service charges resulted in a media firestorm that saw McCarthy and Stone suing the Daily Telegraph unsuccessfully for £800,000. After that, Peverel was sold off.

Neither internal nor external management is the answer when you have an onerous, disadvantageous lease that gives ample scope for exploitative management.

The arguments over retirement leasehold are exactly the same as they were 20 years ago (only this time leaseholders are better informed thanks to the internet).

You can either conclude that retirement leasehold attracts more than its reasonable share of the greedy in leasehold management – and certainly there have been a few – or that this form of tenure is flawed and has no future.

McCarthy and Stone has now got new management – the new CEO Mark Elliott arrived in September – and desperately needs to revive confidence.

At present, leasehold retirement is a sector where capital values have plummeted worse than any other residential asset, where buyers are staying away and where there is a strong whiff at the highest levels of government that something is amiss.

McCarthy and Stone had sales of £258 million to the end of August, which is a 12 per cent increase, but it is still shouldering a mass of debt – with HBOS, which means us taxpayers – and is far from being profitable. It is reportedly seeking a stock market listing to raise cash.

While Campaign against retirement leasehold exploitation has no appetite to get involved in formulations of hot air in a customers’ charter, we are very happy to discuss changing the substantive issues of fairness in the freehold and lease.

Getting that right might just give the sector a future.

This post was amended December 11.


  1. I simply cannot imagine why anyone could possibly think that producing a new Charter will be a magic wand and change anything! Time and time again it has been shown that the present culture remains and that management continue with their predatory practices. They may well think it good PR to convince the ignorant, but the prevailing culture remains and there is simply no incentive to change.

    18.00 Tuesday December 11 2012

  3. At least McCathy and Stone are at last becoming aware at that retirement leaseholders are extremely frustrated may be this is the first step for them in respecting that fact–we live in hope?


    I was pleased to hear you had a face to face meeting with McCarthy and Stone.
    If you did co-operate with them would it be possible to negotiate for better terms in the lease? Are McCarthy and Stone still members of ARHM and would any improvement by them rub off onto the ARHM and their other members?
    I can see there are pros and cons if you get involved, but it would give many of us hope that some improvements would be forthcoming. The problem with the current situation is that we have reached stalemate. This government and any future Conservative government with not force changes, the OFT have approved exit fees, and the trade organizations insist everything is OK. For those of us who are already elderly, it seems nothing is likely to happen in our lifetime.
    One disadvantage of you co-operating with McCarthy and Stone would be that the government would see it as voluntary regulation which they support and use it as another excuse not to bring in legal framework.
    I think your suggestion of commonhold developments or forming a management company from residents is too much to expect from residents who will mostly be over 80 years old.
    Therefore, on balance I think it would be better for Campaign against retirement leasehold exploitation to help and encourage McCarthy and Stone to produce a fairer Customers Charter and to insist on them making their lease conditions fairer. After all McCarthy and Stone are now one of the better managers and they have scrapped exit fees. After agreement, their progress could be closely monitored by Campaign against retirement leasehold exploitation and, if successful, maybe the ARHM would take notice and adopt the same principles.
    I realise that this suggestion will not go down well with some of your supporters, but there seems to be no other easy way to a quick solution. Could McCarthy and Stone plus Campaign against retirement leasehold exploitation lead the way to improvements which will never come if left to this government or the trade organisations?

  5. It is very disappointing to read this:

    “I think your suggestion of commonhold developments or forming a management company from residents is too much to expect from residents who will mostly be over 80 years old.”

    Tomorrow, retired leaseholders in their mid to late eighties at Elim Court in Plymouth make their third attempt to obtain right to manage from its freeholder who is deploying a solicitor and a barrister to fight the action at Leasehold Valuation Tribunal. It is essential that they win.

    All retirement leaseholders should exercise right to manage: not to manage the site themselves on a day-to-day basis, but to appoint a managing agent of their choosing, not the freeholder’s.


    Sorry to disappoint you with my comments.
    I hope that the residents of Elim Court are successful in their action. If it is their third attempt it must have been a prolonged stressful time for them.
    From my knowledge of retirement complexes and their residents I would have thought that the majority would find this type of action a strain and not good for their health. This is the very argument I use when campaigning for government action on fair regulation.
    To be honest, my main reason for purchasing this type of property would be for the expectation of a quiet, secure stress-free life. If it means a lot of legal wrangling and appointing new managers (who could in themselves turn out to be as bad) then I might as well stay in my own house which I can manage myself.
    It would be interesting to hear of your other readers’ views on this.
    I still feel that something could be achieved by Campaign against retirement leasehold exploitation working with McCarthy and Stone if it would mean fairer conditions in their lease and a fair customers’ charter. The residents committees on individual complexes could report back to McCarthy and Stone / Campaign against retirement leasehold exploitation on the progress that has been made.
    If things worked out, then it would be in the interest of other management companies to follow suit as it would make their properties easier to sell.
    In the meantime, we must all keep pressing the government for some fairer regulation and the for the trade bodies to get a grip on those of their members who treat their residents with disdain.

  7. Campaign against retirement leasehold exploitation is right to decline participation in any negotiation that may serve to keep the leasehold system going. The DNA of Campaign against retirement leasehold exploitation is to Campaign Against Retirement Leasehold Exploitation and that exploitation only ends when the present long leasehold system (leases over 21 years) is replaced by the commonhold system.
    When you buy a property with tenure under freehold title or commonhold title, you become the owner with permanent rights to ownership.
    Whereas when you buy property with tenure under leasehold title – costing as much as a freehold property — you become just the long-term tenant with rights to use the property. On approaching the end of lease, the value the leaseholder’s premium (ie the price paid for flat) in the lease falls to nil.
    Leases are always drafted by the freeholder’s solicitors to “protect the freeholder’s interests” and so the lease terms are more favourable to him and less favourable to the tenant (the flat buyer). These leases become legally binding contracts and after a lease is registered at Land Registry, the entire court system of England and Wales will function to protect the freeholder’s rights under the lease for the whole of the 99 years, or 125 years term notwithstanding the lease contains terms which may be unfair for leaseholders.
    The problem arises when the freehold titles of the block of flats are acquired by unscrupulous investment companies and they employ equally unscrupulous managing agents to exploit the unfair terms in the leases or engage in “grazing in the leaseholders’s service charge account”.
    Many leaseholders are feeling the pain under the leasehold tenure system, but successive housing ministers and civil servants are refusing to recognize the problem of leasehold tenure. Leaseholders in England and Wales do not even have full implementation of the protections under the Commonhold and Leasehold Reform Act 2002, such as a separate trust account for holding service charge money for each estate. The government doesn’t care about the leaseholders pain under leasehold tenure and only cares for protecting the legal status of the leasehold tenureship.
    If leaseholders want honest management of their service charge account, they must set up a Right to Manage Company (RTM) to take legal control of their service charge account and to appoint another local managing agent to replace the existing agent which works for the freeholder’s interests.
    If leaseholders want to protect the value of their investment in a leasehold flat , they must collectively buy the freehold title of the building ( called freehold enfranchisement ) . Only after the freehold title has been bought, can the leaseholders gain the right to make changes in their leases.

    No. its unrealistic to think unscrupulous freehold companies will voluntarily allow a residential lease to be modified .

    Campaign against retirement leasehold exploitation is already saying “don’t buy into a leasehold retirement home” – so take this advice seriously.

  8. Happy New Year for 2013. Going forward into the new year , lets get our act together and keep –

    1. pestering our local MPs to stand up in Parliament and demand “Commonhold” tenure to replace the Long Leasehold tenure ( over 21 years). You cannot get change in your life until your elected MP stands up and demands change.

    2. pestering our local MP to stand up in Parliament and demand the commencement of separate bank accounts for holding the service charge funds for each estate.

  9. When a builder sells a property under freehold title or commonhold title, the buyer is buying “legal ownership” of the property. When a builder sells a property under leasehold title, the buyer is buying a “long-term rental agreement” giving right of use for the property and the buyer pays a “premium for the lease” which is degraded by time and value of the premium falls to nothing at the expiry of the lease.

    When the freehold title for a block of flats is disposed to an outside party, that party will always try to extract the maximum return from the leaseholder. So when a buyer buys a leasehold title property, he or she gets a time degrading “long term rental agreement ” and that agreement ( called a lease) becomes another company’s business asset to be exploited.

    Leasehold property can sell at price levels very similar to price levels for freehold property but since there may be 3 or 4 flats built over the same land footprint , the profit return is probably much higher for building blocks of flats. Also the later sale of the freehold for a block of flats may bring the extra profit to builder ( we can estimate at 300 pounds GR x 16 years = 4800 pounds per flat .).

    The recent TV Despatches programme (in Sept 2012 ) showed a situation where the developer could pitch the selling price for one bed flat very high at 275K and voluntarily reduce this 225K to lure a prospective buyer to purchase their sale flat. I would estimate the lower sale price must still give over 100K profit margin. So why do developers need to separate the freehold titles from the leasehold property buyers and sell onto another party ?

    When will we see the first retirement developer selling flats under commonhold title ?