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Monday, December 14, 2009

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

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