Why do some retirement villages have hidden fees?

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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.

More older people are renting homes – at least temporarily

Renting property in retirement

The notion that older people are blocking the housing market for younger people by sitting in family homes they no longer need is perplexing. Family homes are not what young people want so where’s the problem? Or is it that if they moved out everyone on the ladder could step up a rung and then there’d be room for those starting out?

Whatever the argument, a new report from Saga suggests that actually older people may be actually competing for smaller homes in an unexpected way.

More older people are renting

The survey finds that a third of over 50s are currently living in rented accommodation. That’s up from 25% in 2011. Saga reports that the biggest increase in renters is in the 50-54 age group, and that 20% of renters over 50 are single. And Saga thinks many of them are waiting to get back onto the bottom rung of the housing market.

Why’s that happening? The rise in “silver splitters” is a likely cause. As people live longer they’re continuing to evaluate their happiness into their retirement years and divorce is a more common option. That involves selling the family home and splitting the assets. One family home doesn’t necessarily equate to two smaller properties in the same area, so people are taking their time to decide where and how they are going to invest again, if they can.

Downsizing on a single income

Moving into specially built retirement apartments or villages may not be an option. While these properties range in price dramatically depending on the provider, facilities and location, they are generally not cheap. One apartment could easily eat up the value of an entire family home.

Moving away to save money

Moving to a different part of the country is also often mooted as the answer to unlocking the value of assets. But anyone hoping for a pretty cottage in the Cotswolds or a charming cathedral town will be disappointed, as these have become destinations of choice for retirees. And even last week there was a surge of searches around moving to Scotland, as shocked pro-EU voters wondered if Scotland might leave the UK and rejoin the EU in the next few years.

Competing in the first-home market

All this suggests then that it’s in the small home market that older people may be competing with first-time buyers. If that’s the case, then calling retirees out for holding up the property market by staying in the large family home is a tad unfair.