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Retirement Living: An update on event fees

Retirement living for the ‘baby-boomer’ generation, according to novelist J.G. Ballard in his 1996 novel, Cocaine Nights, was controversially portrayed as a chain of dystopian retirement complexes on the Spanish Costas. The story saw elderly residents indulging in criminal activities, promiscuity and over-indulgence in order to fill their leisure time and deplete their considerable pension incomes.

Thankfully, the reality of the retirement industry in the UK today is very different! Growth in purpose-built apartments for the over-55s has created a wealth of communities, often with luxurious facilities including pools, spas, salons and cafes. The pursuit of an active, healthy older age and long-term independence is therefore a realisable dream for many. Yet it too hasn’t been without controversy. One aspect of common practice has long been the subject of scrutiny; event fees charged to those choosing to sell their retirement properties, or otherwise bring their occupation to an end.

These fees can be called a range of names such as transfer fees, contingency fees, deferred service charges, deferred management charges, deferred membership fees or even selling services fees. Different fees attract different charges, and can range from as little as 1% for transfer fees, to as much as 30% for deferred membership fees.

As long ago as September 2009 the Office of Fair Trading (OFT) announced an investigation into the fee(s) charged but it wasn’t until February 2013 that the OFT reported on its findings, shortly before the office itself was closed and its responsibilities (in part) passed to the Department for Communities and Local Government (DCLG). The DCLG in turn referred the issue of event fees to the Law Commission in September 2014, who has been considering whether legislation might be helpful in providing clarity to the fees. The UK Government clearly recognises these fees as a crucial component of the retirement housing sector and the importance of that sector to the entire housebuilding industry, with specific regard to demographic projections of an ageing population.

The Law Commissioner, Stephen Lewis, recently spoke at a seminar organised jointly by the British Property Federation and the Associated Retirement Community Operators – who represent retirement village operators in the UK. It was suggested that the consultation exercise undertaken by the Law Commission (which concluded in January 2016) will lead to a Code of Practice promoting transparency over event fees, both at initial sale and for any subsequent resales during the term of the lease.

If retirement community operators comply with the Code, then there would appear to be no basis upon which the owners of retirement community properties could challenge payment of the event fee(s) – whether through claimed ignorance of the requirement to pay or on the supposition that such an obligation was an unfair contract term.

The Law Commission is to publish the first draft of the Code of Practice this month (October 2016) and it will be a major step towards clarifying and making certain the mechanism by which the extensive communal facilities can be provided at retirement villages without prohibitive “up front” cost to the owners and residents.

 

These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.

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