The rogue practices were revealed after a two-year investigation by the Law Commission, appointed by the Department of Communities and Local Government (DCLG), found ‘event fees’ were being abused and costs of up to 30% of the property price were being billed to retirees.
Retirement homes are nearly always sold on a leasehold basis and many of the leases include a fee triggered by an event. These events include the sale or sub-let of the property, if the for example the resident is moving into care, or if they changing the occupancy to allow a spouse or carer to live in their home.
High-quality specialist housing can be expensive owing to running costs for services such as communal facilities, security and on-site care. Event fees can be a good way of allowing those on low incomes to purchase a property now, but defer the payment of some of the running costs until they sell their house at a later date.
However, some landlords are hiding complicated fee calculations in terms and conditions or springing charges on older homeowners in unexpected situations.
Law commissioner Stephen Lewis said: “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.
“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.”
The commission has recommended the regulation of the sector and the implementation of a code of practice. This would put an end to fees being charged unexpectedly and a cap on fees in certain situations.
It wants all fees to be outlined to the buyer at an early stage in the purchase process and changes be made to the Consumer Rights Act, which would mean a breach of the new code of practice would make the fees unenforceable.
The commission has also recommended that if a carer or the resident’s husband or wife moves into the property, an event fee would not be charged.
Lewis said legal uncertainties such as these were putting off developers from building more retirement homes for older people. The commission believes that if these uncertainties were removed, more investment would be encouraged back into the sector.
A DCLG spokesperson said: “It’s vital that the fees older people pay for retirement properties are fair, reasonable and easily understandable. We welcome the Law Commission’s wide-ranging review and we will consider the report’s recommendations closely.”