Village life can provide support and company for retirees, but watch out for extra fee add-ons.
Life in a retirement village might sound like the perfect plan for your or your parents' later years. Alongside the individual property, there is usually access to facilities such as spas, landscaped gardens and restaurants. What's more, the social aspect of living in a community can stop older people feeling isolated. They can retain their independence and receive an appropriate level of support at the same time. But behind the glossy brochures lie some high and opaque charges which may come as a nasty surprise to residents and their families.
Factor in the fees
Most retirement properties, sold solely to people aged over 55 or 60, are leasehold. It's important that if you are downsizing from a freehold house you fully understand the implications of buying a leasehold property. You'll essentially be buying a long lease, rather than full ownership of a property, and you'll have to pay an annual ground rent. The amount will depend on the lease, but it could be as much as £500 or more each year. Some leases also allow for ground rents to be reviewed or increased at regular intervals.
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The government has proposed capping ground rents on new-build properties at £10 a year, but the proposals contain an exemption for retirement housing. This is because retirement housing, and the associated facilities, costs more to build, says the government.
It is suggesting providing older people with a choice of how to pay for their retirement property, so purchasers will be able to pay a higher sale price at a ground rent of £10 a year, or a lower sale price with higher ground rent.
On top of ground rents, retirees also need to pay a regular service charge to cover the cost of services provided by, or on behalf of, the freeholder. These include maintenance of the communal areas, provision of facilities such as restaurants and gyms and, in many cases, payments into a contingency or "sinking" fund. Many retirement schemes have a warden or house manager to provide on-site practical and emotional support to residents. Service charges need to cover the warden's salary and, if they live on-site, their accommodation too.
For a one-bedroom retirement flat, you can expect to pay between £1,500 and £3,000 a year in service charges, but for some luxury sheltered properties the charge may be more than £10,000, according to charity Age UK.
Fees lack transparency
Some of the most controversial fees buried in leases for retirement housing are known as "event fees". These are triggered when certain things happen, usually when the property is sold, sublet or remortgaged, or if a partner, relative or carer moves in. Leaseholders and their family members have long complained that not only are these fees high but they also lack transparency. Charges are often calculated as a percentage of the re-sale price or market value of the property and can range from 1% or 2% up to 30%. Before you sign a contract on a retirement home it's vital to be absolutely clear about event fees.
Note, too, that not all retirement housing providers charge exit fees payable when a property is sold, including one of the biggest providers, McCarthy and Stone. However, it does charge high ground rents, and it is also one of the biggest campaigners aiming to stop leasehold reform including a cap on ground rents in the retirement sector.
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