Important considerations when buying a retirement home
have dedicated sites to source retirement apartments both new and second hand.
The legal titles are nearly always leasehold and the term of the lease is usually 125 years. Under the terms of the lease, the apartment owner will be liable for an annual ground rent of circa £200 per annum plus service charges which are typically paid on a monthly basis.
The regulations contained within the lease will restrict and govern the occupation of the apartment to ensure the owner complies with the requirements of the landlord developer. One such restriction will require the owner to be self-sufficient and if the owner becomes incapable of looking after themselves they may have to vacate and move into residential care.
Furthermore, most leases contain a covenant not to sub-let the property which may be a disadvantage to some buyers.
Retirement apartments are not care homes. However, the services provided usually offer a medical and health support service. Other services include a residents’ lounge, visitor room and overnight facilities as well as recreation and shopping facilities.
All such services have to be paid for out of the service charges collected by the freeholder landlord from the leaseholder. In essence, the more services available, which is of course to the benefit of the property owner, the higher the service charges. The level of the service charges will affect both the value and saleability of the apartment.
Accordingly, you need to know exactly how much the service charges are, or, in the case of a new property, expected to be so you and your mother are able financially to afford the monthly charges for many years to come.
Buying any property is a long term financial investment. If your mother becomes unable to pay the service charges then the lease may be forfeited and she will have to sell the apartment.
The sale prices for new apartments are usually at a premium. Accordingly, buying a second hand apartment may make more financial sense.
However, the lease usually contains a covenant that upon each sale two “transfer fees” of usually one per cent of the sale price are payable; one fee payable by the seller and one payable by the buyer.
It is my view there is more supply of retirement properties than demand and thus the location can be the key factor when buying. If there are shops, a doctor’s surgery, chemist and bus stops nearby the development then this will appeal to a wider buyer audience than a development in a more remote location.
Before making any offer I would request that a copy of the lease is sent to your conveyancer and they report to you upon the salient covenants affecting occupation, costs on sale and service charge history.
John Robson is Residential Conveyancing Manager at Ford & Warren Solicitors, Leeds.