How to spoil a good thing through complexity
A UK Law Commission report just out has made recommendations that should bring clarity to the cost of moving to a retirement village. That sounds good, but it does bear looking at more closely.
First, why do we need greater clarity? It seems that when customers buy into these schemes, they’re always fully aware of the costs involved. The homes within retirement villages are offered on a leasehold basis, but not necessarily under the same rules that we’re used to elsewhere in leasehold living.
Many retirement village owners charge “exit fees” when the property is sold or there’s a change of occupancy. And it’s this charge that is not always made clear and can come as a surprise to residents. The Law Commission would like to limit when and how these fees are applied and to ensure that potential customers are made aware of the charges early in the process.
However, the Law Commission’s recommendations are not see as stringent enough by some. Back at the end of 2016, when the draft report was published, organisations such as AgeUK and Carlex argued that the report didn’t go far enough. For one thing, the Law Commission didn’t appear to be interested in looking at historic cases, but only at new entrants to the market.
We took a look at the role of retirement villages as part of the retirement and assisted living mix a while ago, and our conclusion, as with many choices, is that it can be the right way to go for some seniors.
Retirement villages do not receive bad publicity on the whole, so it’s puzzling why some providers are almost bringing a poor reputation upon themselves by appearing to confuse, if not deceive, their residents.
As in many markets, reputation matters in retirement living. People moving into villages, apartment or other voluntary living will talk about their experiences with friends. Most of the target audience – late 50s into their 60s – are happily technology-enabled, and have all the tools to share their views with a wider world. And bad news always travels faster than good, so providers who are less than upfront about their fees are likely to feel a growing backlash.
Regardless of the Law Commission’s report, honesty and transparency are better long-term marketing tools than hoping to confuse customers for short-term gain. Whether or not the Commission’s guidance is taken up by the government, all providers would be well advised to think hard about their business models and how they affect their reputations and future sales.