If you want to buy a retirement house or flat, you should check out the ongoing costs and what you might have to pay when you come to sell. Here’s a guide.
What is a retirement flat?
A retirement flat is a property on a development that’s designed for older people. There are several things that may distinguish it from an ordinary block of flats or development:
- There may be a lower age limit. You normally can’t live in a property on one of these developments unless you’re a minimum age (50/55 or over is typical).
- The properties may come with more communal areas than ordinary blocks of flats, such as a communal dining room, living room(s), swimming pool and/or cinema.
- Properties will normally be fitted with an alarm system.
- Properties will normally be ‘leasehold’. This means that when you buy the property, you only purchase the right to live there for a certain time – which is the length of the lease.
SAVVY TIP: You don’t own the building outright. Instead, a landlord or freeholder owns the building and any land and gardens that are part of the development.
- There will often be a manager or warden who can provide extra help and support. They used to live in, but these days (partly in response to the EU Working Time Directive, which set an average limit on a working week of 48 hours), managers are more likely to be available during normal working hours or at set times.
SAVVY TIP: A number of developments have different types of property. Some are designed to accommodate people who are older and who need more intensive care and others are aimed at people who are in good health but who want to live on a development with other people of a similar age.
Buying a retirement flat – what to look for
The first thing to say about retirement properties is that they aren’t cheap. Both in terms of the purchase price and (sometimes, but not always) in relation to ongoing costs. When you buy a retirement flat you may have to pay:
- The purchase price: this may be the cost of buying the property outright or of owning a share of it (called, unsurprisingly, shared ownership). With shared ownership you can buy part of the property and pay rent for the rest.
- Ground rent: this is paid to the landlord or freeholder, normally twice a year. It can be as little as £100 but it may be several times more.
- Service charge: this is a charge that pays for things like buildings insurance (you have to buy your own contents insurance), upkeep of the properties, lifts, communal gardens etc. This is set by the company managing the retirement village, which may be different to the landlord/freeholder.
SAVVY TIP: The service charge may be several hundred pounds a year or it could be several thousand pounds. Also, this charge can increase sharply from year to year. It’s always a good idea to ask to see the service charge for the last three years so you can get an idea of whether there has been much of an increase recently.
- An exit/selling charge: this is something paid when you sell your flat or bungalow. It can be a flat fee or a percentage of the property’s value. In some cases it can be as high as a third of the value of the property – so do check this very carefully before you sign the contract.
Questions to ask
Before you buy a retirement property, I’d recommend getting answers to the following questions:
- What does the service charge include?
- Is there a sinking fund and, if so, how much is in it at the moment? A sinking fund or reserve fund is a fund that all the leaseholders pay into and which pays for large repairs (such as replacement of the windows or roof). The idea is that the flat owners don’t have to come up with a large amount of money with very little warning. Some schemes have a sinking fund and others do not.
- How much has the service charge risen by over the last few years?
- Who is the development managed by?
- Is there a fee or charge if I want to sell the property?
- What is the manager or warden’s responsibilities and how often is he or she on site? Is this something that can easily be changed by the managing agents? Some retirement properties have made big changes to the hours that a scheme manager spends on site and this has been a source of concern and worry for some of those who’ve bought properties there.
- Is the freeholder or managing agent a member of any professional body? There are several that may be relevant. One is ARMA, which is the Association of Residential Managing Agents. It represents managing agents across all sectors, not just the retirement property sector. All members must offer leaseholders access to a complaints scheme. This includes a code of conduct and a binding complaints scheme. The other organisation that might be relevant is the Association of Retirement Housing Managers.
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