The UK’s rapidly ageing population will inevitably give rise to new products and services designed to meet needs in older age. The Law Commission has recently turned its attention to a particular part of this market: the provision of specialist retirement housing, and, in particular, the fees payable in connection with this accommodation.
Many retirement housing schemes provide services over and above those expected in housing for younger people. These might include a live-in warden, alarm cords and a residents’ lounge, or even on-site care homes, swimming pools and restaurants. Inevitably, there is a cost attached to the provision of such services and this cost might be more than many older people can pay on a monthly basis from income.
Various methods of deferring these charges have evolved. In some cases, for example, on the sale of the property, a certain percentage of the proceeds might be payable to the developer or into a fund for the upkeep of the property. Fees might also arise on other occasions such as sub-letting the property, a carer moving in or a mortgage being taken out. While these fees ensure that the monthly service charges are kept to an affordable level, they have caused controversy due to a perceived lack of transparency and information about their existence and extent, particularly as they can be as much as 30% of the sale proceeds.
The Law Commission consultation paper on hidden fees notes that consumers can make irrational decisions when making purchases because of particular behavioural characteristics, and these are very much to the fore when older people consider retirement housing. A prospective buyer making such a decision tends to focus on the present (and can be unconcerned about future fees); is over-confident (for example, not taking into account the possibility of having to sell to move into care) and does not wish to lose costs which they have already expended on the potential purchase.
The Law Commission feels that some of the current problems could be tackled by greater transparency about the fees with the information being both clearer and available much earlier in the buying process. Views are being sought on the Law Commission’s suggested reforms, which include:
- Stringent Codes of Practice, backed by legal sanctions for non-compliance, which would require developers to be clear about fees;
- The restriction of such fees to sale or sub-letting with views being sought on “a fair and proportionate way” in which sub-letting fees can be calculated (as opposed to some current practices when they can be a percentage of the property’s open market value);
- Proposals to ensure that price information is displayed clearly and early in the process, including provisions that require estate agents to include information in their adverts and property details and
- Bringing such fees within the terms of the Consumer Rights Act so that clear legal redress is available.
Specialist retirement housing in the UK is, currently, small compared to the size of its increasing target market, and also smaller than other more mature markets such as the USA. Given the expanding need for this type of accommodation the Law Commission’s review is to be welcomed and, hopefully, if its recommendations are implemented, older people will have greater protection when making a decision vital to their welfare in later years.
Responses can be made to the Law Commission’s consultation until 29 January 2016.