… that’s on top of a £26,950 fall in value after 11 years of ownership
A family whose parents owned a one bedroom flat at Anchor’s 59-unit Cherry Trees site in Redcar, Cleveland, have been hit with a double whammy common in retirement leasehold.
First, the flat for over-55s was bought for £79,950 in 2004 but sold last November for 34 per cent less: £53,000.
So far, so normal: retirement flats are the single worst performing residential asset it is possible to purchase in this country and they frequently bear no relation to the local property market.
But the Matson family were also mortified to receive a £9,341 demand for the contingency fund based on 11 Years 4 months of ownership.
The figure is calculated on a charge of 1% of the purchase price, not the price achieved on re-sale.
Additional feelings of grievance arise because the Matsons’ father died on January 5 2014 and the flat has been vacant ever since. So while the flat languished on the market, falling in value, the contribution to the contingency fund went up.
Peter Matson told LKP:
“I am aware of recent cases the OFT have disputed with McCarthy and Stone and Fairhold regarding such exit or reserve fees and its recommendation is that any such fees be based on ‘market value’ and not the original purchase price.
“Is there any future proposal to cancel all such exit fees altogether by the Law Commission and would that in any way be retrospective if all correspondence was kept?”
The Matson’s believe the clause in the lease is an “unfair contract term especially if it was not specifically advised at time of purchase to my ageing parents or alternative payment arrangements proposed by Anchor”.
The Matson’s did not use a solicitor recommended by Anchor to purchase the flat.
Anchor has provided LKP with a full and lengthy reply. The leases at Cherry Trees were varied in 1991 when the then residents agreed to introduce the contingency fee clause to the lease rather than contribute via monthly service charges.
Anchor points out that it can use surpluses in the contingency, or sinking fund to offset the monthly service charges. Residents have benefitted from this by about £80,000 in the last two years.
Anchor does not agree with the Matson family’s view that the contingency fees are an unfair contract term.
“Our experience to date is that leaseholders prefer to contribute to the sinking fund via ‘event fees’ paid on a disposal of their property rather than through the service charge.
“If, however, a majority of leaseholders indicated that they would prefer to make regular contributions to the sinking fund via the service charge we would be happy to explore with them how we could best accommodate that preference.”
Anchor also referred to LKP pointing out that McCarthy and Stone had varied its requirements to contribute to the contingency fund on subletting, after we had taken the issue up with the company.
‘As fhttp://www.betterretirementhousing.com/mccarthy-stone-reform-sublet-fees-discussions-Campaign against retirement leasehold exploitation/ar as I am aware, Anchor has never sought to require a contribution to the sinking fund on a subletting,” reads the letter from Anchor company secretary David Edwards.
However, the one point not addressed by Anchor is whether the contingency fund “event” fee should be based on the price paid for a flat or the price sold.
LKP has never had an issue with contingency fund exit fees in principle, but when a retirement flat plummets in value it is unsurprising families feel bitter.
The full Anchor letter is below, as is the relevant part of the deed of variation (click to read).
Related posts:
The Times: ‘Exit fees and poor resale values: the uncomfortable truth about retirement homes’
Family outraged by £50,000 exit fee on sale at Retirement Villages’ Mayford Grange
Heirs of empty retirement leasehold flat now face doubled council taxes … on top of plummeting re-sale value, on-going service charges and an exit fee if it ever does sell
Pensioners tell Dudley Joiner to give them back their £27,000 sinking fund
Housing minister urges transparency over retirement exit fees
Second LKP patron knighted: Arise Sir Ed Davey!
