Campaign against Residential Leasehold Exploitation reveals abysmal retirement housing re-sale values

Comments

1. Michael Epstein

   September 6, 2016 at 7:22 am

   If you think the losses in values are bad now,You haven’t seen anything yet?
   Remember, these flats are leasehold and the clock is ticking on the remaining years of the lease.
   As time counts down, values will go down faster than the lift in Towering Inferno!

   • chas

     September 8, 2016 at 12:02 am

     chas says:

     September 8, 2016 at 12:13 am

     Hi Susan, nice to hear from you again.

     Michael,
     I posted last year that McCarthy & Stone developments had lost up to 40% of the value of purchase. Having said that, I recently posted, that over night, the local ex McCarthy & Stone One Bed Flat increased from £75k to £109k over night.

     Was this a collusive decision between Freeholder, Fairhold 7 Landlord Estate & Management along with the local Estate Agent?

     Other local development where Fairhold and E&M are not involved, at Ashbrook Court increased in value by up to 20% over the past ten years?

   • chas

     September 18, 2016 at 6:28 pm

     Michael Remember:

     McCarthy & Stone (M&S) in a damming programme in 2012, was not the first time they were rumbled regarding unfair charges at their own developments. On 24/09/12 almost 4 years ago a Chanel 4 Dispatches Program on Retirement Leasehold exposed McCarthy & Stone. This was a brilliant example of television journalism that was extremely critical of both McCarthy & Stone and Peverel. The defeat at the LVT at the hands of pensioners at Strand Court, Rye can be read on the betterretirementhousing.com Website.

     The focus was an exposé of McCarthy & Stone, whose seemingly motherly sales force (“mother value” is the dubious term M&S uses) were revealed to be unreliable. New buyers would have been appalled at the way the sales team coaxes them into a disadvantageous part-exchange sales process of their existing home.

     Marion Bowley, in Weston super Mare, was offered £140,000 for her pleasant family house. But she sold it herself for £190,000 some £50,000 more, after only two weeks on the market.

     In 1989 a damming article about McCarthy & Stone regarding excessive inflated Service Charges in England. Comments from residents spoke about excessive and misleading sums for the Service Charges.

     1991 M&S launched High Court action against Daily Telegraph, claiming £800,000 damages over many articles regarding excessive service charges.

     1993 M&S sold Peverel as they were perceived as a potential conflict of interest.

     After the first article appeared, there was a crisis management meeting attended by Nigel Bannister head of Peverel, (now director at a similar Peverel Company, Freemont) Others involved including Head of Age Concern Sally Greengross, who had referred in the House of Lords to us pensioners as “barrack-room lawyers” with too much time on our hands.

     More critical articles against M&S by the Daily Telegraph continued. In 1991 M&S launching a libel action against the Daily Telegraph. Suddenly during the court case the High Court learned that M&S had just been fined £2,000 by the OFT for misleading sales literature. M&S had spent £200,000 on lawyers, decide to walk away, therefore loosing their Libel Case.

     1993 the perceived conflict along with the loss of the court case and the fine for misleading sales literature resulted in the sale of Peverel for £30 million as part of a Management Buyout. This was managed by Electra Investments. Strangely Electra Investments, along with Chamonix, later purchased Peverel out of administrators in 2012 for £50 million.

     M&S now own Churchill Retirement Living, run by family members. M&S are attempting to resurrect the company having recently removed all Peverel Managing Agents from portfolios.

2. ElTel

   September 6, 2016 at 11:55 am

   These RED figures are quite startling when compared with normal market trends, especially if ‘offspring’ are looking to recover some monetary value from the passing of their retired relative after all their efforts in ensuring a comfortable ‘autumn’. Are there any figures to show alterations to Ground Rates on purchasing a 2nd hand home and also impact on Lease agreemnets when approaching the magic yearly number count (which slips my mind). These figures may have more of an immediate effect on the resident whilst alive, wheras the on-sale value is merely, and to be blunt, a bequeathed liability

3. Robin MacKay

   September 6, 2016 at 12:11 pm

   Re-sale values plummet
   Interesting post, for years you have been raising the profile of escalating service charges and Right To Manage Sites generally being 20% less.
   In view of this there should be a correlation between sites that have achieved RIGHT TO MANAGE and re-sale values which buyers are looking for.
   For example our service charge for 2016/17 is £5000 less than 2009, due new local agent (no Vat charged) competitive insurance cover and careful control of budget since 2010 by RTM. Keep the garden tidy, decorate the common areas, new good quality machines in the laundry room, first impressions count at all sites, and relatives are not forced into a distressed sale situation.

4. Worried prospective purchaser RF

   September 6, 2016 at 12:11 pm

   I have been looking at the possibility of purchasing a property in Hampshire from Churchill since August 2015 and having researched property sales of a number of their sites in the South using land registry records going back some 10 years, I have been appalled at the poor resale prices being achieved at all of the sites I reviewed. Anything up to 62% of original purchase price.

   As a result I have reluctantly concluded that the best way to decimate my family’s legacy when I eventually pass on, would be to purchase, would be to purchase such a property. After much thought and several debates with Churchill sales team members (which always centre about lifestyle choices), I have totally abandoned the idea.

   As a point of interest I am curious as to why you did not include Churchill in your survey as a number of their senior management are Ex McCarty employees!!!!!

   • admin

     September 6, 2016 at 12:18 pm

     A mistake. Churchill Retirement Living figures have been added.

     [McCarthy family own Churchill.]

5. Michael Epstein

   September 6, 2016 at 1:20 pm

   One of the reasons I suspect for the large falls in value for retirement developments is that the initial purchase price is artificially enhanced as part of the ” Buying into the lifestyle” value put on it by the developers. take this “lifestyle’ feature away, and purchasers are paying up to 40% over the odds as compared to a fairer asset price.
   Since the majority of purchasers are downsizing, they tend to give less scrutiny to the actual financial burdens of living in a retirement development.
   The frustrating thing is, that the concept of retirement development living is a very good one, when the system is not exploited.

6. Michael Hollands

   September 6, 2016 at 7:30 pm

   This loss of resale value is nothing new. It appeared in an article in “This is Money” in 2012.
   When M&S first thought out and created this Retirement Complex industry in the 1980’s it was a brilliant idea and filled a big hole in the market.
   The owners of freehold houses were prepared to pay good money to downsize into a secure and stress free lifestyle.. Services/Mamagement charges, Ground Rent and Exit Fees were little understood then and so were overlooked..
   When M&S sold out to some rather dubious characters things took a turn for the worse and values plummeted.
   The whole industry got a poor reputation, but still there was a shortage of this accommodation so the new updated and much higher spec complexes still sold and still do. And they still eventually fall in value.
   One must think of it as an investment into a lifestyle, Something that cannot be turned into a cash profit, and something that could be more of a liability than a windfall to those who inherit it.

   • admin

     September 7, 2016 at 8:29 am

     Knowing that retirement house prices fall and being able to demonstrate it are two different things.

     And there are differences in re-sales depending on the market when the site was completed: more positive if the site was sold during the downturn; sharply negative if sold out during the boom years.

     The article we have published is no more than a snapshot of figures revealed in the Land Registry. Once our membership of the Open Data Institute is formally announced next month, we can begin mining all these data sources for comprehensive information on all aspects of leasehold, including retirement property prices. The information then needs to be properly analysed, which the above is not.

     Your other points: The problems with McCarthy and Stone did not begin with its sale, or the sale of its freeholds, which is what we think you mean. There were problems with the leases (exit fees, high ground rents, short leases of only 99 or 125 years) and the monopoly property management (cf John McCarthy’s failure to silence the Daily Telegraph in 1991; the OFT inquiries into exit fees and the Peverel / Cirrus price fixing scandal, both of which are covered exhaustively on betterretirementhousing.com).

     It is a very good thing for the elderly to downsize and to live communally in many circumstances. But the price should not be a property purchase of evaporating value.

     The care operators have a different model: there is a purchase of a lease, but this is bought back by the operator at the price paid or a percentage of price paid (95 per cent in the case of the Methodist Housing Association, for example) and the site is maintained as a long term asset. In other words, retirement property is a form of club.

     The New Zealand company LifeCare Residences, which is just selling out the very fancy Battersea Place, is doing this by charging a 30 per cent exit fee. In return, management charges remain fixed from the point of purchase. So the financially literate people buying there are making this calculation: this outfit knows what it is doing and is managing this prime London site for the long term; the property will rise in value and will get hit by the 30%; the kids won’t like that, but our service charges will remain static.

     Well, it is another way of producing retirement housing. And it is wholly to be welcomed that new companies are entering this sector and bringing in fresh thinking.

7. Michael Epstein

   September 6, 2016 at 8:12 pm

   I believe it was Mr Sebastian O’Kelly who said at the time “retirement leasehold is a spectacularly bad property asset that has fallen in value further than any other residential property. The reason is clear. developers have encrusted the leases with sub-letting and exit fees and property management companies have profited in every way possible”
   What was true in 2012 is still true in 2016.

8. Alec

   September 7, 2016 at 6:09 am

   “The frustrating thing is that the concept of retirement development living, is a very good one, when the system is not exploited.” – Michael Epstein above, and

   “: …when M&S sold out to some rather dubious characters…” – Michael Hollands.

   What a sordid, damning, and totally depressing state of affairs, which applies just as much to 10o’s of 1, 000’s of ordinary leasehold properties as it does to retirement living.

   Submissions [before end October] should be made to the Law Commission on this wholesale abuse by the unscrupulous few., and I would ask LKP to post full details so as to encourage this.

   As reform takes time to come into effect, strong representation should be made to the Law Commission requesting that EXISTING legislation be vigorously enforced.

   If the “dubious characters” and their fellow traveler legal advisers are checked by a declaration that existing laws will be scrupulously upheld, and gamesmanship lawyers disciplined where appropriate, this should provide the springboard for further reform.

   And get rid of the unscrupulous few, and their advisers, through whom this sordid trade is presently being allowed to fester unchecked.

   That this rotten band can exploit the elderly in such large numbers is not just unconscionable but inhuman.

   • Michael Epstein

     September 7, 2016 at 7:43 am

     How often have you seen an advert for a car that is available for a three year period on a lease?
     At the end of the advert, it is made clear that “you do not own the car”
     And yet, change the word “car” for “property” and suddenly you “Own” It?
     So I would ban the use of the term” Homeowner” for any property that has a lease attached.
     You are not buying a leasehold property. You are buying a lease, which gives you the right to occupy a property for a said term until the end of the lease.
     All leases should be made readily available to potential purchasers..

     • Michael Hollands

       September 7, 2016 at 9:30 am

       I think the question of whether it is legitimate to describe leaseholders as Home Owners need sorting once and for all.
       M&S use the term numerous times in their Life and Living magazine, and in their Guode to Retirement Living and Guide to Purchasing a Retirement Apartment.