A family selling a McCarthy and Stone retirement flat with a rip-off lease condition have been saved £25,000 after the case was taken up by LKP.
Rita May Bailey, who is now deceased, bought the one-bedroom flat at Bridewell Court, in Widnes, Cheshire in February 2008, which has a registered price of £167,450.
Mrs Bailey, a retired teacher had part-exchanged her four-bedroom freehold house for £140,000 as part of the purchase of the McCarthy and Stone flat.
The flat was a shared-equity purchase with the extraordinary condition that McCarthy and Stone receives 30% of the original purchase price from the sale proceeds.
That is £50,235.
But the flat is only under offer at £85,000.
As is not infrequently the case with retirement flats from the volume house builders, re-sale values at Bridewell Court have collapsed in the decade since it was built.
The price of £85,000 appears consistent with other re-sales at Bridewell Court (see below).
This means that Mrs Bailey’s family could anticipate around £25,000 proceeds from the sale of their mother’s flat, after estate agent and legal fees.
The rip-off lease condition opens up the intriguing possibility that, were the property to sell for less than £50,235, Mrs Bailey’s family, theoretically, could actually end up in debt after the sale of an asset.
McCarthy and Stone’s part-exchange arrangements were criticised in a Channel 4 Dispatches programme in 2012.
Mrs Bailey’s family is also concerned to discover that their mother used unfamiliar solicitors in Warrington for this transaction and that they were recommended by McCarthy and Stone.
LKP raised the issue with McCarthy and Stone chief executive John Tonkiss, copying in the then Communities Secretary James Brokenshire and the MP chairs of the All Party Parliamentary Group on leasehold reform who are also the patrons of LKP:
Sir Peter Bottomley,
Jim Fitzpatrick,
Sir Ed Davey.
Within 24 hours, McCarthy and Stone agreed to drop its demand for 30% of the original sales price.
It provided the following statement to LKP:
“This shared equity plan was offered between 2007 and 2008 to a small number of purchasers. It helped them to enjoy a property better-suited to their needs along with significant on-site support and companionship that comes with retirement living. These purchasers could not have afforded to experience this lifestyle without the benefit of this shared equity plan.
“However, we recognise that in this instance the terms of the plan have become unfavourable and we are happy to accept a reduction in the amount due. We will contact [Mrs Bailey’s daughter] to discuss this further.
“All shared equity plans offered since then by the new owners and management of McCarthy & Stone, who were appointed following the company’s pre-packaged administration in 2009, are based on market value at the point of resale.
“It is disappointing to see any development fall in value. Bridewell Court was selling during the 2008 housing recession and this had a major impact on long-term values. We have contacted First Port, who manage the development, to see if they can comment further.
“Since 2010, we provide our own managing agents in all new developments who deliver care and support for our homeowners. We also remain as the landlord on all new schemes. Along with providing larger and better designed apartments, this helps maintain the long-term quality and value of our new developments. We are pleased that c.70% of our managed apartments increase in value on resale.
“In 2017, we launched a new in-house re-sales operation to further support our customers and their families when they come to sell. We find that high street estate agents are typically unable to effectively market and value specialist retirement properties.
“Our Resales operation can properly explain the retirement living lifestyle to new customers and consequently they are seeing a healthy increase in average resale prices.”
LKP has asked McCarthy and Stone how many of its retirement properties have this lease condition and whether it has contacted current owners with these lease terms to inform them that they will now apply to the price on sale.
Below are the re-sale prices achieved at Bridewell Court from the Land Registry:
2016-08-26 £73,500
2007-05-31 £129,450Apartment 11
2007-04-27 £134,450Apartment 14
2015-07-17 £95,000
2009-04-22 £125,000
2005-08-12 £164,950
Apartment 15
2015-05-08 £88,000
2005-08-12 £138,708
Apartment 16
2016-07-29 £100,000
2011-12-05 £107,500
Apartment 17
2015-11-20 £83,000
2006-05-15 £138,193
Apartment 19
2019-04-18 £80,000
2005-09-23 £134,575
Apartment 20
2016-07-15 £100,000
2013-04-08 £110,000
2008-03-28 £185,950
Apartment 21
2015-10-09 £85,000
2011-10-28 £118,000
2005-08-30 £150,950
Apartment 23
2016-06-17 £70,000
Apartment 24
2018-03-09 £67,000
2009-11-12 £115,000
2005-11-24 £137,052
Apartment 26
2015-07-24 £73,000
2007-08-31 £129,535
Apartment 28
2019-01-17 £64,000
2011-09-05 £100,000
Apartment 33
2014-08-29 £100,000
2006-09-21 £172,450
Apartment 34
2012-08-23 £90,000
2008-05-09 £155,950
Apartment 35
2016-06-03 £88,000
2008-08-29 £164,950
Apartment 40
2015-12-01 £73,000
2007-04-27 £123,950
Apartment 42
2011-12-20 £70,000
2007-05-11 £142,693
Apartment 44
2017-07-14 £77,000
2007-08-29 £139,950
Apartment 49
2016-05-24 £72,500
2009-10-21 £117,500
2005-08-26 £122,950
Apartment 5
2019-02-01 £83,000
2016-11-18 £81,000
2011-12-15 £95,000
2005-08-26 £122,950
Apartment 6
2014-03-17 £80,000
2008-03-06 £135,450
Apartment 8
2018-12-12 £80,000
2008-08-22 £134,450
Apartment 9
2019-03-22 £70,000
2005-08-26 £119,693
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You need to name and shame the solicitors that acted, so that other potential victims can be warned to avoid them. If it hadn’t been for `compliant’ solicitors many of these leasehold scandals could have been avoided.
I assume there is a typo in the last phrase of this story, and it should be 30% of the sale price.
Clearly the dream can easily become a nightmare!
Sales of new build McCarthy & Stone developments are experiencing somewhat of a downturn. This is not going to be helped whilst other retirement developers can sell their developments without the imposition of ground rents on leaseholders(a charge for absolutely nothing other than to increase income for McCarthy & Stone)
So if sales are falling, other means of offloading flats needs to be found.
Hence the drive towards shared ownership or rental.
Disturbingly McCarthy & Stone refer to attracting institutional property investor trusts as investors in such properties.
So could it be that a rented flat is no longer owned by McCarthy & Stone, but by an “investor”?
The more rentals in a development the harder it becomes for residents to take control if they are unhappy with costs or quality of management. More rentals impact on re-sale prices.
The phrase used by McCarthy & Stone a a way to enhance income “Opening up new developments for wider community use” must be a cause of concern especially if the development has a gym or swimming pool?
It is also disturbing to find that McCarthy & Stone intend for their management division to generate 5% of their income.
Remember the sad history of a previous incarnation when McCarthy & Stone were associated with Peverel/Firstport? The price fixing, the overcharging, the poor service? the fatal fire at Gibson Court? All for the sake of revenue generation?
That, Peverel/Firstport survived was in a good part because they were “granted” leaseholds on house manager’s flats which they promptly mortgaged and subsequently sold.
To this very day neither McCarthy & Stone nor Firstport have ever offered an explanation as to how these leases came to be gifted o Peverel/Firstport?
So in the current circumstances if I were to be asked would I buy a McCarthy & Stone flat in a retirement development (I will answer anyway in case I am not asked?) I would answer No!. At least until the retirement sector is cleaned up, with residents having much more control and not being left so vulnerable. Whilst this type of living has much to commend it, ownership still represents very poor value for money.
However this is one over riding reason for my decision not to recommend a purchase.
Many will be familiar with the very well publicised failings of Peverel/Firstport? Indeed McCarthy & Stone sacked them from all the developments they were able to which were the developments that the freeholds had not been sold off. They now manage the newer developments themselves as McCarthy & Stone rightly recognised the reputational damage being caused by Peverel/Firstport management.
So who has McCarthy & Stone appointed as their CEO?
Step forward Mr Paul Lestor.
Mr Lestor the former CEO of Knight Square (parent company of Peverel/Firstport)
Absolutely very well done
I also believe in naming and shaming solicitors i.e
J.B.Leitch who is the corrupt First Port choosen solicitors springs to mind!!