Retirement villages face crackdown on 'unfair' fees

Homeowners living in retirement villages face unfair charges of thousands of pounds each, the Law Commission has found.

After a two-year investigation the Commission said there was "real potential for abuse" in the charging of event or transfer fees.

When residents move out, or need a carer to move in, they can be charged up to 30% of their property's value.

Some rogue operators keep such charges hidden in the small print, it said.

The money is supposed to cover running costs and service charges in retirement communities, which are becoming increasingly popular in the UK, having started in the US.

The Commission stopped short of banning the fees, saying instead that they should be more transparent.

And it did not go as far as the Office of Fair Trading, which said in an earlier report that exit fees were likely to constitute an unfair contract term.

'Fleeced'

Bert Elley's family had to pay large fees after he left a retirement village last year

Ken Ward, from Rayleigh in Essex, said he was unaware of such fees when his father in law, Bert Elley, moved out of a retirement home shortly before he died last year.

In addition to service charges, and losses on the value of the property itself, the family had to pay an extra £1,725 for administration.

"They fleeced him. The whole thing has not been a good experience," he told the BBC.

"I asked them to justify the fees. It just seemed so wrong that they took all this money."

Justification

Nevertheless the Law Commission said exit fees worked well for many people, by deferring bills until after they sell their home.

"But, in the worst cases, a few unscrupulous landlords are getting away with very high hidden fees buried deep in the small print of a long and complicated lease," said the Law Commissioner, Stephen Lewis.

"We'd urge the government to crack down on rogue landlords by regulating the sector, and making sure that before consumers sign on the dotted line, they have already been told exactly what's being provided for their money."

He also wants a 10% cap on fees charged for sub-letting or change of occupancy.

Retirement Villages: What's the catch?

The Leasehold Knowledge Partnership (LKP), which represents the interests of leaseholders, was highly critical of the report.

It said the Law Commission had given the green light to exit fees.

However the industry welcomed the report, saying that it wanted more regulation of the sector, not less.

The Association of Retirement Community Operators (ARCO) said event fees were used to cross-subsidise running costs.

"In other countries, event fees are a well-established mechanism that enable older people to use their housing equity to "enjoy now and pay later", for example by reducing their service charge or deferring some of the costs of building communal facilities," said Michael Voges, ARCO's executive director.

There are now about 160,000 retirement properties of this type in the UK.