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,
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:
2007-05-31 £129,450Apartment 11
2007-04-27 £134,450Apartment 14