OFT website outlining the agreement is here
http://www.oft.gov.uk/news-and-updates/press/2012/77-12
The Office of Fair Trading (OFT) has secured undertakings from Fairhold Homes Ltd and associated companies (Fairhold) owned by the Tchenguiz Family Trust to change how they charge and enforce transfer fee terms in their 53,000 retirement home leases.
The OFT has been investigating exit fees, which are payable when a tenant sells or lets out their retirement home and in some other situations, for three years and had promised a “substantive announcement” in August. Typically calculated as a percentage of the value of the property, these fees can amount to thousands of pounds.
As a result of the OFT’s investigation, Fairhold has agreed to make a number of substantial changes to the way in which it conducts its business. Fairhold has undertaken that it will not charge a transfer fee in any new leases it obtains through the acquisition or development of properties, unless the fee is for a service and represents its reasonable costs.
It is not clear at this stage whether other Tchenguiz freehold vehicles, such as Proxima, are covered by the agreement.
Fairhold has also agreed to change how it enforces terms in the leases of its existing retirement home properties:
- It has clarified that leaseholders will not pay any transfer fee when the lease is passed on through inheritance or surrendered, or when a relative or carer moves in with them.
- A flat fee of £85 (to be adjusted in future years in line with inflation) will be charged for sub-letting, replacing the current transfer fee of one per cent of open market value. This should make it more viable for tenants to sub-let properties they do not currently need to live in. Where it has discretion under a lease, Fairhold will also waive the separate contingency fund fee of one per cent of the open market value payable upon sub-letting. It will instead charge a fee equivalent to one month’s rent for each sub-let. Contingency fund fees are calculated in a similar way to transfer fees, but are paid into a ring fenced fund to pay for repair and maintenance of the development.
- A transfer fee of one per cent will continue to be charged on sale. But it will now be calculated against the lower of either the price the tenant sold the property at, or the price the tenant originally paid for the property. This will give tenants certainty over their maximum liability at the time they purchase the retirement home, and also prevent disputes about what the right level of fee should be. The fee was previously calculated as a percentage of the higher of the sale price or open market value, which could lead to disputes about what the property was really worth. It is worth noting that as retirement properties have proved to be among the worst investments in residential property, they often sell for far less than their purchase price of even 10 years ago.
- Fairhold will also provide potential new purchasers with clear information summarising all the amounts payable under the lease. This will be presented in an easy to read format accompanied by worked examples, helping potential leaseholders understand what they are agreeing to before they purchase. Fairhold will do this where it is made aware that the person has an interest in buying one of its retirement homes.
The OFT considered that the transfer fee terms were likely to be in breach of the Unfair Terms in Consumer Contracts Regulations 1999 (the UTCCRs). The company said that it did not agree with the OFT’s view but co-operated and agreed to the changes.
Vivienne Dews, OFT Executive Director, said:
’We are pleased that we have secured changes from Fairhold, which is a major player in the retirement homes sector. The changes will greatly reduce the circumstances in which transfer fees are charged, provide certainty upfront for leaseholders on their liabilities on sale, and improve transparency of costs for future tenants.
‘This case marks an important milestone in our continuing work to secure fairer and more transparent transfer fee terms for retirement home leaseholders.’
The OFT continues to investigate a number of other retirement home companies in relation to their use of transfer fee terms and intends to provide an update in the Autumn.
Related posts:
Office of Fair Trading deal over exit and sub-letting fees with Tchenguiz
Campaign against retirement leasehold exploitation activist told OFT exit fee deal with Tchenguiz also includes Proxima
Exit fees: what to do after the OFT/Tchenguiz deal
‘Curtains for exit and sublet fees’ by Law Commission … but not until March 2017
Although after 3 years investigation these modest improvements are welcome, there is still a lot of unfairness about these Exit Charges which has not been resolved.
The company Fairhold is likely to be sold off, so waiving Exit Fees on future acquisitions is unlikely to affect them.
Although a reduced charge of £85 when letting out the property is welcome, why is it necessary to pay a 1% fee into the contingency fund when money continues to be paid into this fund via the management fee.
Although the Exit Fee will not apply to the inheritors of the property in the vast majority of cases the property would be eventually sold off and the charge would then apply.
If the OFT consider this charge to be a breach of the Consumer Contracts regulations 1999 why on earth do they agree to let it stand?
Have they ever discovered what services are provided to substantiate this charge.
Lets hope that when the new minister of Housing receives this statement he will take the necessary action to outlaw Exit Fees.
You’re forgetting that the new minister will be told by his party chairman that six figure donations from the Tchenguiz Family Trust are a GOOD THING and that “red tape” is a BAD THING.
The Conservative Party sold any integrity it ever had long ago, it’s crazy to expect any now.
If it is the case that the Conservatives can be easily bribed by powerful property interests not to intervene in the many abuses in retirement leasehold, I suggest the following remedy:
If each of the residents of retirement properties donate £3.00 each to the Conservative Party funds then it may be persuaded to introduce some regulations to protect us.
£3? You must be joking. You’d need to tens of thousands of donors to match landlords’ donations. And the sad thing is that they paid off the Conservatives with money taken from leaseholders and used it to bribe them to block further regulation.
There must be around 80,000 of these properties, so at £3.00 a time £24,0000 would be a good start.
Sold down the river by the Office of Fair Trading. Methinks they need to change their name.
The OFT has “rolled over” in response to the consultation with landlords such as (Un)Fairhold.
The exit charges on selling still stand.
The only way to deal with this would seem to be a Court (Class?) Action.
Who is big enough to start the ball rolling?
The LVT determined the subletting fee should be 40pds . See LVT case below
http://www.residential-property.judiciary.gov.uk/Files/2012/April/LON_00AF_LAC_2011_20_10_Apr_2012_17_16_22.pdf