Families inheriting a retirement home are left with huge bills

By Lauren Thompson 
Thousands of families are being left with huge bills after inheriting retirement homes.
Money Mail can reveal how beneficiaries of retirement flats are finding themselves with a property they cannot sell, rent out or even move into.
Instead, many are left forking out thousands of pounds a year for service charges and face sky-high fees if they do sell the property.

 Home curse: Janice Gill and Margaret Morris have been unable to sell their mum's flat for 3 and half years on the market (case study below) 
Around 200,000 pensioners own retirement homes. They are marketed as a hassle-free way for people to spend their final years. The flats often come with a warden and communal areas such as a garden and restaurant. But when a relative dies and passes on their home it can cause a financial headache.
Richard Townsend-Rose, of CarlEX, a campaign group set up to help leaseholders, says: ‘Many older people move into retirement flats because they think it will offer them a carefree lifestyle. But the reality can be very different, with service charges increasing every year and the worry of how their children will pay the charges when they pass away.’
Retirement flats are normally bought on a leasehold. The owner must pay an annual service charge to a managing agent, who runs the flats on behalf of the freeholder, known as the landlord. But many owners fail to read the terms and conditions of their lease properly and remain unaware of the exit fees, which can vary among landlords.

Retirement Villages, which owns 1,000 properties in developments that typically contain a restaurant, bar, library and gym, does not allow a property to be sublet and charges a hefty sum — between 5 per cent and 12.5 per cent of its price — when it is sold.
Elsewhere, Fairhold, which owns 18,500 retirement properties, typically charges 1 per cent of the property’s value if the owner sells or rents it out.

Hanover, which owns almost 4,500 retirement properties, charges up to £25 a year if the property is rented out. If the flat is sold, owners may have to pay between 0.25 per cent and 1 per cent of the property value.
The landlords say these charges are vital to pay for the upkeep of communal areas. The reputation of some retirement homes has also been hit in recent years, making properties difficult to sell and forcing them down in price.
Laura Sandys, the MP for South Thanet in Kent, has been campaigning for fairer treatment of pensioners in retirement homes. She says residents face difficulties such as increasing service charges, expensive and sometimes unnecessary renovations, a lack of consultation for residents, and attempts to block the creation of residents’ associations.

The Office for Fair Trading is investigating a number of firms to see if exit fees — charged when someone sells a home — are fair. It expects to make an announcement in the next few months.

Both residents and beneficiaries can challenge unfair or excessive charges at a Leasehold Valuation Tribunal (LVT).
Case study
Janice Gill and Margaret Morris inherited their mother’s retirement flat in 2008. They have been unable to sell it and have paid more than £15,000 in service charges to managing agent Peverel.
‘The flat is crippling us financially,’ says Janice. ‘We’ve reduced the asking price to almost half what our mother paid.’
Their mother, Edna Johnstone, bought the one-bedroom flat in 2006 for £208,950. Now it is for sale for just £125,000. The sisters will be charged 1 per cent of the flat’s market value — £1,250 — if they sell or rent it out.
Peverel Retirement says: ‘We are obliged to collect transfer fees on behalf of the landlord [Fairhold], and we pass this fee directly to the landlord.’
A spokesman for Fairhold says: ‘Transfer fees are a legally binding element of the contract which Mrs Gill and Mrs Morris’s mother entered into when buying the lease. On inheriting the flat, the sisters also became liable to fulfil the obligations contained in the lease.’