Top tips for buying a retirement home
What is retirement housing?
Most retirement housing are available to people over the age of 60 and is sold on a leasehold basis, which means there should be a long lease on the property with a small ground rent payable to the freeholder. Most retirement homes are managed by a management organisation, which is responsible for the day-to-day management of the housing, including providing the relevant services and setting and collecting service charges.
What should the service charge cover?
- upkeep and cleaning of communal areas, such as corridors, lifts, communal lounges, external grounds etc
- repairs and maintenance to the overall structure, exterior and communal areas
- buildings insurance
Your older relative has certain rights regarding the service charges, including access to a summary from the managing agents of the income and expenditure for the previous accounting year, but they may have to request this in writing. Under the codes of good practice your parent also has the right to be consulted on how the service charge has been calculated prior to the accounting year.
What does your parent have to pay?
Your parent will normally have to pay for:
- maintenance and repairs to the inside of their flat or bungalow
- ground rent
- Council Tax
- contents insurance
- TV licence (for under 75s)
- telephone and fuel bills
Some charges for water and fuel bills may be part of the service charge if they are for communal areas, e.g. for a communal laundry, lighting and heating. Some retirement housing may give a concession on the TV licence.
How can you check if the management company are any good?
It is critical to check who the management is, what experience they have at managing such properties and what their communication channels with residents are like. Check whether they are members of a recognised trade body, such as the Association of Retirement Housing
Managers (ARHM), which promotes and maintains standards of management in privately owned retirement housing. All management organisations registered with the ARHM are bound by the ARHM Code of Practice.
Also check if there is a residents’ association that works with the management organisation to ensure residents’ views and needs are considered and addressed accordingly.
The warden service
Many retirement housing schemes have a warden or manager. The duties of the manager vary between schemes. Information about the manager’s duties, hours of service and details of any relief or emergency cover during the manager’s absence should be included in any Leaseholder Handbook.
The manager’s salary and related overheads can account for a substantial percentage of the service charge, as they will include the manager‘s salary and, if the manager lives on site, the cost of the maintenance of the manager’s accommodation and may include their rent. Schemes without a warden will probably charge a lower service charge.
A funding system called Supporting People can assist with paying towards housing-related support services, such as warden services and an emergency alarm service. If your elderly relative is on a low income, they might be able to get help from your local authority, who will need to assess your relative’s financial situation.
How to protect your rights as a resident of a retirement community
There are two main codes of practice that exist to protect residents’ rights in retirement housing:
- The National House Building Council (NHBC) Sheltered Housing Code of Practice applies to all retirement housing built after 1 April 1990. When buying a new property check if a developer is registered with NHBC. Buildings with NHBC’s Buildmark warranty will give extra protection. The code instructs the developer to ensure that residents’ rights are fully protected by a legally binding management agreement between the developer or freeholder and the management organisation. All purchasers must receive a Purchaser’s Information
- The Association of Retirement Housing Managers (ARHM) Code of Practice regulates managing agents including private companies and housing associations who manage private retirement housing. Their code covers issues such as good practice in providing services, including the scheme manager service and setting and collecting service charges. It also states that a management organisation should consult residents on all significant issues, hold annual meetings, visit schemes at least quarterly and encourage the setting up of residents’ associations. Valuation Tribunal.
What should the Leaseholder Handbook include ?
This should include:
- The name and address of both the freeholder and the management, details of the relationship between them, and information on whether the management organisation is a party to the lease.
- A summary of your older parent’s contractual rights and responsibilities as a leaseholder, including service charges, insurance, warden responsibilities, alarm systems, consultation, repairs and other rights that are specific to that scheme.
- A full explanation of services and facilities provided by the management organisation
- Details of all payments, fees or charges due
- Details of rights on resale, including details of any restrictions, for example, that you can only sell to someone over 55 or 60 years of age, and details of any deduction such as fees for administering re-sales, premiums to the landlords or managers etc.
- Details of any transfer or exit fees, which the leaseholder is required to pay to their freeholder if they sell or rent their property, dispose of it in some other way or otherwise make changes to the occupants of the property.
Shared ownership schemes
There are some schemes available for older people who cannot afford the full market price of the retirement property. These can involve buying part of the equity of the property and paying rent on the remainder, or buying the right to live in a retirement property for the rest of your elderly parent’s life. You should seek independent legal and financial advice if you considering one of these schemes.
More financial advice HERE
More legal advice HERE