Key considerations for buying a retirement property

As the population gets older, we are seeing an increasing demand for suitable ‘later living’ housing. There are some impressive providers, creating a sense of community and keeping later generations well-integrated into society.

Retirement housing is usually aimed at those over 55 or 60.  Most retirement housing is sold on a leasehold basis and most new-build retirement properties come with a 999-year lease.

Obtaining specialist legal advice on buying a retirement property is fundamental. Here is why: –

Service charges

Typically, the service charge associated with retirement living can be substantially higher than that of a non-retirement lease. This is owing to the fantastic facilities available in retirement villages, such as swimming pools, restaurants, gyms, and beautifully manicured gardens. It is important to understand the level of service charge you will be facing and how this can be increased.  The lease should be carefully examined to understand what the landlord must provide against what they choose to provide.

How is the service charge levied?

Under the Landlord and Tenant Act 1985, advance service charge payments must be reasonably incurred. However, the decision in Anchor Trust v Waby [2018] established that,if there is a fixed management charge linked to an index (i.e. to increase in line with a specified formula, usually relating to inflation), this can fall outside the statutory protections.In this situation, a tenant cannot challenge the reasonableness of such charges. This is often seen in retirement leases so, again, it is important to fully understand the mechanism here for certainty on future charges.

Event Fees

This is a fee payable under a lease on certain events such as the re-sale or subletting of the property (also known as exit fees, transfer fees, deferred management fees and contingency fees).

Why – to contribute towards sinking funds for major works and to cover the higher cost of providing specialist facilities.  This is to maintain affordable service charges.

Lack of transparency and understanding can be an issue here if you are not fully advised on how these fees will operate. Upfront information should be provided and your legal advisor must fully explain to you what these are and when they will be payable (as this may not be just on a re-sale).   For new homes, this must now also be declared at the reservation stage.

Regulation – The Law Commission has published a draft code to regulate these charges and to protect leaseholders from unfair or hidden fees.  To date, the Government has committed to approving the code but has yet to do so.

Age Restrictions

Most retirement housing will have an age restriction, typically 55. This is also often imposed as a planning condition from when the complex was first developed and there will be an assignment provision within the lease to comply with. Typically, the prior consent of the landlord will be required.

Make sure this is all dealt with before exchange of contracts! In some cases, the manager will want sight of the ID documentation and medical details (or even to meet with the buyer / new resident) before they will consent to the sale!

This highlights some of the points that need to be carefully considered and advised on when buying a retirement property.  At Bolt Burdon, we have a specialist offering to help guide you through this process and to ensure you are well-informed on all intricacies.