The Sunday Times yesterday published a powerful article by Harriet Meyer revealing how her family spent £48,160 in fees on selling at Audley Retirement flat.
Audley Retirement is one of the upmarket providers in the sector, which Campaign against Retirement Leasehold Exploitation has long argued has even greater exploitative practices at the higher end than the lower.
Harriet’s grandparents John and Margaret Porter bought a £523,500 flat from Audley Retirement in 2003 at the imposing Willicombe Park site in Kent.
The Victorian mansion has been kitted out with communal facilities, a swimming pool and care could be arranged. It is one of 15 luxury villages around the country.
Mr Porter died in 2006, and Mrs Porter in February 2015 aged 99 after having been bedridden for several years.
“For my family and me, it was a blessed relief that she passed away peacefully at home, as she wanted,” Miss Meyer writes.
The flat went on the market for £800,000 through Audley’s own sales team. The price then dropped to £725,000. Meanwhile, service charges mounted up on the empty property.
Last July the price was slashed again to £650,000.
Miss Meyer looked into appointing another agent, but was told that no one had ever sold a property using an “outside” agent and there would be a fee for doing so, under the lease.
Finally, an offer came in of £540,000, which rose to £560,000 on negotiation. The flat was sold in December last year, 22 months after Mrs Porter died.
The exit and estate agency fees totalled £48,160.
In addition, there were £23,794 to pay in service charges for the empty flat. (We believe subletting is not permitted at Willicombe Park.)
What Audley Retirement charges
Audley Retirement’s estate agency fee was 2 per cent
In addition, there is an administration fee of one per cent
There is an exit fee (“deferred management fee”) capped at 5 per cent at Willicombe Park. This fee is potentially much higher at newer Audley Retirement sites, where 1 per cent a year exit fees with no cap can be charged.)
Nick Sanderson, CEO of Audley Retirement, told the Sunday Times that all these terms were explained to Mr and Mrs Porter before purchase.
“This has been an upsetting situation for the family and we are sorry to hear they had a difficult time. On average, our resale prices track the UK house price index, and although many outperform this index, some do perform less well.
“Mr and Mrs Porter would have been told of all the associated fees, and certainly their solicitor should have made it clear in his report before purchase. Both the level of the fee and what the money is used for would have been explained to them.”
Some Audley Retirement resale prices from the Land Registry can be read here: http://www.betterretirementhousing.com/dire-retirement-housing-values-revealed-land-registry/
Exit fees have long been controversial in retirement housing, and the defunct Office of Fair Trading rightly described them as a potentially unfair contract term in September 2012.
Last month, however, the Law Commission recommended that exit fees were fine so long as they were transparent: ie made clear to the purchaser.
LKP has been strongly critical of the Law Commission’s report, and recommends that the housing minister rejects it.
Exit fees established in the lease give a guaranteed and legally enforceable income stream, which also permits corporate gearing on a large scale.
They helped make Vincent Tchenguiz one of the most important corporate players before the financial crash.
It is less clear, to those who pay them, what the exit fees are actually for.
Sebastian O’Kelly, of LKP, told the Sunday Times: “What other investment could somebody have made in March 2003 only to sell for not far off the same sum 13 years later, with huge penalties on resale?
“The fees seem nothing more than an easy way of exploiting a vulnerable group of people.
“The bad reputation of retirement flats is entirely justified and explains why only 2% of people over 65 in the UK live in designated retirement properties, compared with 12% in north America and 17% in Australia.
“Until the property industry stops treating it as a get-rich-quick bonanza, the sector is never going to change.”
Nick Sanderson, of Audley Retirement, told the Sunday Times:
“Our deferred management charge ensures owners are not presented with unexpected cost when large maintenance and replacement projects are required – for example, repairs to the swimming pool or restaurant, as well as the exterior of the home.
“This means the monthly cost of living in an Audley property is kept to the absolute minimum.
“Because we collect these deferred fees and sales fees, it means no owner will eve be asked for extra money. That’s the certainty we offer.”
LKP questions this explanation.
What certainty is there that if major expenditure is required it would be paid for by these exit fees? The fees are not allocated for any specific service, and do not go into a contingency fund.
So, if a few sites had major unexpected repairs and Audley Retirement also, say, wanted to give a bonus to its CEO, how would it raise the money?