My parents are buying a retirement flat from McCarthy & Stone

My parents are buying a retirement flat from the specialist developer McCarthy & Stone. 

I am worried about the fees they might face – would they be charged escalating ground rents? 

What other charges does a company like this impose? 

–Reader, by email

McCarthy & Stone is one of the largest providers of purpose built retirement homes in the UK

Sarah Davidson, of This is Money, replies: There has been a spate of headlines recently about some retirement property developers’ hidden fees and escalating ground rents, so I understand why you may have worries. 

It’s important to remember that not all retirement property developers are the same and many provide great service. 

The typical fees that retirement home providers will charge include ground rent, service charge, exit fees, care fees and a management fee.

Some developers, including McCarthy & Stone, have different levels of package so these fees will vary depending on the option your parents have chosen. 

As it stands, firms are still allowed to sell new properties on a leasehold basis and charge a ground rent. 

However, at the end of last year the Government confirmed it is planning to ban leasehold on most new homes and outlaw developers from charging ground rents. 

The details of how this will be applied to retirement homes are still being thrashed out but it may be that in the future, ground rents won’t be an issue for new homes – retirement or not.  

For now though, the charges on the leasehold your parents are considering buying should be fair, so make sure they understand what they’re paying and what it covers and how it might change in the future before they sign the contract.

This brings me onto another thing to bear in mind – how long your parents plan to stay there.  

A common issue with retirement homes has been that they’re tricky to sell, and often, the price you’ll get back can be lower than the price paid. 

This sometimes happens with ordinary new build homes in the short-term too, but when the property is restricted to being bought by a retired buyer, the number of potential buyers drops. 

This in turn means you may need to accept a lower offer. It can also take longer for the property to sell and the service charges will still need to be paid while your parents – or you, if you’ve inherited it – still own it. Even if there’s no-one living there. 

We asked McCarthy & Stone’s chief executive, Clive Fenton, to give us a detailed breakdown of the costs your parents can expect. Here’s what he said.  

Ground rents

Ground rents are payable on all leasehold properties in England and Wales. 

McCarthy & Stone’s ground rents are fair and stable and set at the outset of the development. They are fixed for 15 years. Increases are then linked to inflation, and are compounded yearly, on 15-year rent review terms.

We do not charge aggressively escalating ground rents that have been the cause of recent media concern (some of which double every few years). 

Neither do we charge ground rent on any of the houses or bungalows that we build. 

Our ground rents are typically between around £400 to £500 per year depending on the property, number of bedrooms and location.

The ground rent income stream underpins the viability of our developments and largely pays for the significant communal areas we provide in our developments. 

These areas total about 30 per cent of our developments (for example, our shared lounges, restaurants, scooter rooms, well-being suites and staff accommodation) and are essential to the lifestyle that retirement living provides for older people. 

Ground rent therefore enables the pricing of our apartments to remain competitive.

Ground rent applies in England and Wales, but not Scotland, which operates under a different legal system.

All of our new leases are for 999 years. Our ground rents do not increase after the 125th year.

The inside of a McCarthy & Stone retirement flat where residents have a 24-hour call system

The inside of a McCarthy & Stone retirement flat where residents have a 24-hour call system

Service charge

Retirement developments require a service charge to pay for the services delivered within the development for customers. We do not charge commission on any of these services and they are provided ‘at cost’. In many cases, our service charges are cheaper than like-for-like costs in a customer’s current property.

Our services vary across our developments. In our Retirement Living schemes, they cover the cost of the house manager, 24-hour emergency call system, intruder alarm, camera door entry system, buildings insurance, maintenance, water rates, sewerage rates, window cleaning for external windows, and heating of the communal areas.

In our Retirement Living Plus schemes, in addition to the items set out above, the service charge also includes an on-site personal care team that is available 24 hours a day, seven days a week, domestic assistance, a full-service restaurant and other support services.

Our service charges in Retirement Living are about £36 per week for a one-bedroom apartment. For a two-bedroom apartment, they are about £55 per week. Retirement Living Plus is more due to the on-site care and support. Costs vary per development.

Exit fees

McCarthy & Stone is proud to be one of the few retirement companies not to charge exit fees, having removed them in new schemes in 2009. 

Our approach is different from some retirement village developers who charge up to 30 per cent of the resale price on exit, which goes to the developer.

There is a 1 per cent contingency fund contribution in our new developments when people sell. 

This is similar to a ‘sinking fund’ and finances carpets and furniture in the shared areas and longer-term repairs and renewals such as roofs, window frames and replacement of lifts. 

It goes to the development and ensures that our homeowners do not face any unexpected financial burdens.

Small administration fees will also apply, and please see our website for more information.

Management of developments

McCarthy & Stone retains a long leasehold interest in our new developments built since 2010. 

Most other house builders don’t do this. This means that McCarthy & Stone will continue to be the landlord and be responsible for the estate management of the development. 

McCarthy & Stone will continue to be the only point of contact for the day-to-day management of the apartment and manage the provision, and quality, of all the services to the apartment and communal facilities of the development. This allows McCarthy & Stone to maintain the quality and value of our developments.

McCarthy & Stone’s developments are typically built to at least lifetime homes standards

McCarthy & Stone’s developments are typically built to at least lifetime homes standards

Carers moving into homes

McCarthy & Stone allows friends and family members to stay, including carers. 

Conditions will apply, and we ask any customers to discuss this with us. We will do everything we can to support our residents. 

As McCarthy & Stone’s developments are typically built to at least lifetime homes standards, very few homeowners will need to move out, and care can be easily delivered, either by our on-site teams in Retirement Living Plus, or by independent carers. 

In addition, there is a guest suite in every McCarthy & Stone development with en-suite facilities, a TV and tea and coffee making facilities. 

A homeowner’s guest or guests are welcome to stay for as long as the suite is available and paid for and costs are typically £25 a night, which goes to the homeowners, not McCarthy & Stone.

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