Retirement housing providers falling foul of the OFT

Not many people know that when you buy a retirement property, especially if it is in a ‘village’ you, or more likely your heirs, will presented with a bill of up to 10% of the property's price, when it is sold. That’s a lot of money and that's what the Office of Fair Trading thought.

Here is an example from the Q&A section Richmond Village's web site.

Question: “If we move out of the village, or upon our death, how is our property sold and is there a charge?”

Answer: “We will market your apartment on your behalf, and deal with all enquiries and show rounds and charge an assignment fee of 6% - 10% depending how long you have been living in the village. This fee is deducted from the market price on the sale of the apartment to cover sale costs and a share of the capital cost of the facilities.

This is what the OFT said: “We have announced an investigation into the contracts signed by occupants of purpose built owner occupied retirement homes. The OFT considers that a number of terms on exit fees in these contracts may be unfair and so may breach the Unfair Terms in Consumer Contracts Regulations (UTCCRs).

The OFT is issuing formal written notices to 26 retirement home firms setting out its concerns over terms on exit fees charged when residents sell or rent their properties.

It sounds to me like a lot of these companies have just lost a large slug of the capital value of their properties. That is going to make a rather large hole in their balance sheets. Anybody from the retirement property world want to comment or are you all in a state of shock! Not the sort of Xmas present a property developer wants. Dick Stroud

Property slump costs pensioners £220bn

I have been having a late spring clean of my desktop and come upon a pile of stuff I should have blogged about but never got the time.

This is a nice factlet to slip into a presentation.

According to propertyfinder.com (not exactly the statistical gurus of the UK) pensioners have had £220bn of their wealth wiped out in the past year as a result of the housing crash.

Even though they make up less than a sixth of the population, they own a third of the country's property by value. The total value of pensioner property in England and Wales has fallen to £800bn.

Retired people own half the property by value on the south coast and even more of the equity.

The UK's top "inheritance hotspot" is Christchurch in Dorset, where pensioners own 54% of the property stock by value.

Even if these figures are a tad wrong it illustrates the importance of the retired to the dynamics of the property market and the important of the dynamics of the property market to the retired. Dick Stroud

Salutory tale for retirement village builders

This is a sad story.

In 2007 a Victorian, former workhouse and hospital in, Essex UK, was converted into a retirement village. Then came the credit crunch; purchasers vanished, except for one poor soul who paid has money and moved in.

Two years latter the 86 year-old remains the sole inhabitant. After spending £6 million on the development the owners went belly-up.

The chief executive of the English Community Care Association, said that it was expecting to see many more retirement and care homes suffer the same trouble. “It is only now that people are starting to see the impact the credit crunch is having on their income,” he said. “People are in a much more precarious financial position than they were in before. Their property is not as valuable and those whose income is based on share incomes have seen an enormous drop. “People are reluctant to make any financial decisions at the moment — and that includes making decisions about care.”

A lot of developers believed that retirement properties were a no risk investment. For a decade, property investments had been a one way bet. What could go wrong? Ask the poor guy in Essex.

However, it is not all doom and gloom. It all comes down to supply and demand. Near to where I live there is only one decent retirement property complex and its properties have not suffered any price erosion. Dick Stroud

The Tripadvisor of retirement communities?

This is the first time I have bumped into TopRetirements.com.

Here is how the site describes itself.

Topretirements.com is where real people share honest opinions about the best places to retire. This Web 2.0 site was launched in late 2006 with the goal of helping the 78 million baby boomers now starting to turn 60 make more informed decisions about where they should live in retirement.

Our guiding lights are - you have to live somewhere, retirement gives you the freedom to start over fresh, so you might as well make an informed decision!

I think it going a bit over the top with the Web 2.0 stuff but the basic idea of a Tripadvisor site for places to retire might just work. The site’s discussion forums aren’t that well used, but that's never a shock.

There is a free download of a location selection guide. Whilst it doesn’t reveal any earth shattering issues it still asks some worthwhile questions that I bet most people don’t consider before moving.

I am doing a lot of work in the retirement property business and I know what a massive decision moving house is for people (certainly in the UK). A web site that can provide information and insights might just work since there is a huge amount of money associated with relocation. Dick Stroud

Ageing in place is set to be big business

This is a good definition of aging-in-place: “Living in one’s home safely, independently and comfortably, regardless of age, income or ability level”.

About 80% of all Americans (55 years or older) own their own homes. As this age group gets older a lot (estimated to be 80%+) want to stay-put and “age in place”. If this is true then there will be significant business in providing the services to enable this to happen.

To add some credibility to offering services in this area you can now become a Certified Aging-in-Place Specialist (CAPS). This new qualification results from work done by the Remodelors Council -- in conjunction with the NAHB Research Center, 50+ Housing Council and AARP.

If you want to see what this looks like from the consumer’s perspective you can download a brochure. Dick Stroud