October 23, 2018

Points to consider when buying a new retirement flat …

By Michael Epstein

There can be no doubt that the new build and post 2010(non Firstport managed) McCarthy & Stone developments offer very good facilities are well managed and can offer residents a good quality of life.

Increasingly extra services are being offered designated as “Assisted Living” No one can expect these services to come cheap, but are they value for money?

Take one of McCarthy & Stone “Assisted Living” developments in the East Midlands (and very good looking it is).

A 2 bed apartment is up for sale for £239,000 on a leasehold basis. The ground rent is around £500 per year. There is an exit fee should the apartment be sold of 1% of the sale price. This is put towards replacement costs for carpets/roofs etc and serves to lessen the service charges for residents.

For a 2 bedroom apartment the service charges are an incredible £181.74 not per month but £181.74 every single week! That is £9,450 per year.

To put this amount in to some sort of context the single state pension currently stands at £164 per week or £8,528 per year.

So sadly, if one partner passes away the service charges are in excess of the state pension. And that assumes the service charges don’t increase?

Of course as the property ages items such as lifts will need replacing so it is probable that service charges would have to increase.

It has often been found as with any new build and akin to purchasing a new car as soon as the property is pre-owned the value drops. Problems with apartment values will occur as the length of leasehold term reduces.

Retirement development living can be very good. But please before being tempted look at the true cost of “ownership” (actually a long term money upfront rental contract and not “ownership”.

Currently there are many McCarthy & Stone retirement apartments that are available for rent. Some really desirable apartments can be rented for £200 per week.

This option would give a potential purchaser time to find out if the retirement development way of living is for them. It also affords time to sell their existing property at a much higher price than a “exchange” sale would achieve?

So if you are thinking of buying a McCarthy & Stone retirement apartment , I am not suggesting you don’t (it is after all your choice) but what I am suggesting is you think Hill Street Blues, and “Be careful out there!

Response from McCarthy and Stone

It is important to understand what is included in the service charge as it covers many costs that would have been paid by older people in their current property. We find that in most cases service charges for one of our Retirement Living apartments are lower than like-for-like costs in a purchaser’s previous property, even though customers also have the benefit of on-site support from the House Manager and other support services. Homeowners rarely have difficulties with the payment of ongoing costs. In addition, heating costs are very often lower due to our modern construction methods and the more manageable size of the new apartment.

For a typical Retirement Living apartment, the service charge is c.£37 per week for a one bedroom apartment and c.£55 per week for a two bedroom apartment.

For a typical Assisted Living (now called Retirement Living PLUS, a form of Extra Care housing) apartment, as noted above, the service charge is c.£121 per week for a one bedroom apartment and c.£161 per week for a two bedroom apartment.

The development you have quoted has a higher than average service charge and this may be because it is a smaller development. Costs will vary depending on the number of apartments and residents.

Costs in Retirement Living PLUS developments are higher because they offer a lot more in terms of services and facilities. They reflect the increased staffing costs (with up to 17 people based on-site), the provision of domestic support packages, including one-hour per week of support as standard, and the table-service restaurant / bistro, which includes heavily subsidised food paid for through the service charge, as well as the full-service commercial kitchen.

The service charges also covers:

· The House Manager (or Estate Manager and their team in Retirement Living Plus)

· 24 hour emergency call system

· intruder alarm

· camera door entry system

· buildings insurance

· building maintenance

· water rates

· sewerage rates

· cleaning for external windows

· heating of the communal areas

Our Retirement Living Plus team is based on-site 24 hours a day, 365 days a year and is registered with the Care Quality Commission in England and its equivalent bodies in Scotland and Wales. Domestic support covers whatever time-consuming chores our homeowners would like undertaken, such as cleaning, shopping, running errands and domestic help. Our homeowners choose how best to use this support.

Additional personal care packages are available. All care and support services in Retirement Living PLUS developments can be provided by our on-site care staff.

Our service charges are also substantially cheaper, as well as being much more flexible, than the main alternative, which is a care home that can cost upwards of £1,000 a week.

Day-to-day services are provided at cost with no commission, with a small management fee to cover our office costs. We hold annual budget meetings with our homeowners, listing out all costs in full, and we agree the ongoing services with them.

These services make a real difference to the lives of older people. Almost nine out of ten of our homeowners say their quality of life improves after moving.

Many homeowners also qualify for Attendance Allowance, which covers much of the service charge in Retirement Living PLUS. Attendance Allowance provides up to £85 per person per week.

We are committed to controlling future costs for our customers. Our service charges rose by just 1% in the last year, much less than inflation, due to our ability to procure efficient services for the best price and run well-managed developments.

A 1% contingency fee is paid on resale. This covers major refurbishment or structural repairs on the development and is similar to a ‘sinking fund’. It is a specific fund kept in the development’s own bank account. It is held on trust and its use is restricted to the maintenance of that development and cannot be accessed by McCarthy & Stone. It helps ensure that homeowners do not need to pay unexpected costs.

The vast majority of our prices increase in value on resale. We have also recently opened a new in-house resale operation to support our customers and, while it is still early days for the team, they have made a positive start, averaging a 10% price increase (or £20,000) per resale.

We provide significant information about our service charges on our website www.mccarthyandstone.co.uk/faq. We advise people to look at this site for full information or contact us directly if they have any questions.

Comments

  1. Michael,

    Your comments relating to purchasing a new build akin to purchasing a new car, where, as soon as the property is pre-owned the value drops.

    The flat I purchased in 2006 was first purchased in 1986 for £34k and now worth over £100k but it is not a McCarthy & Stone Flat. The Freeholder was not linked to Peverel (now Firstport) but the Landlord was a Peverel Company who used Peverel Retirement as the Managing Agents.

    My relative purchased a McCarthy & Stone one bed flat in 2005 and paid £138k.Thirteen years later there was 3 one bed flats in the same development, that were up for sale for £85k. I did mention this in 2016/7 on Carlex and About Peverel (now About Firstport).

    This is 38% drop in value, may be common for ex McCarthy & Stone Developments?

  2. Michael Hollands says:

    I think we can accept that complexes built and managed by M&S are far better than the older complexes which were built to a lower standard, were and still are badly managed, and have run down lease periods.
    So it is not surprising they now retain their value, and the older ones depreciate.
    Let’s hope M&S never again sell off the management contracts solely for profit.
    The service charges cannot be compared with a Nursing Home cost, as there is an initial cost of £200,000 to £300,000 to purchase a M&S flat.
    I notice that M&S cannot substantiate the excessive ground rent charges, which the Government has already advised upon. That they should cease.

  3. Michael Epstein says:

    McCarthy & Stone makes great play of the “Peace of Mind” that living in one of their developments affords residents?
    With that in mind may I inquire of McCarthy & Stone as to how a resident can have “Peace of Mind” if they do not even know who actually owns their home?

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