Residents urged to fight back against retirement home charges

Published 29th Sep 2009

How pensioners can gain redress for the huge bills on anything from insurance to maintenance



Pensioners living in retirement homes are being routinely overcharged by thousands of pounds a year by unscrupulous property companies, putting profits before residents’ interests, consumer groups have claimed.

Residents in retirement accommodation complain of being forced to pay up to double the current market rate for everything from buildings insurance to telephone lines. Often the scale of these fees is concealed by marketeers selling the properties. Only when the purchaser has signed on the dotted line does the true cost become clear.

Growing numbers of pensioners have bought purpose-built retirement homes in recent years, tempted by the promise of a trouble-free existence. There are about 105,000 of these homes in the UK, providing access to care facilities via 24-hour telephone support and a house warden. However, the reality may be far from the idyllic existence painted in the marketing brochures. Residents in some developments say that they have been hit by an avalanche of concealed and costly charges. Many feel that they have no choice but to pay up.

However, growing anger among residents means that some are starting to fight back. Andrew Harrop, head of public policy at Age Concern and Help the Aged, says: “Rather than enjoying their retirement, older and potentially vulnerable people are experiencing a huge amount of stress and worry as they try to challenge these companies to ensure that the charges they are paying are fair.”

Residents are usually expected to pay the annual rent on the flat used by their estate’s house manager. But some of the leading retirement home companies stand accused of inflating the charges.

Donald Heady lives in Montague Court in Westcliff-on-Sea, Essex, which is owned by the property company Fairhold and is managed by Peverel. Residents in the 76-year-old’s block were being charged £15,230 a year to cover the rent on the house manager’s two-bedroom flat. Mr Heady believes that the charge should be closer to £5,000 a year to reflect rates in the local rental market. The fee includes services charges and ground rent, which he insists that residents should not have to pay.

Pensioners, many on fixed incomes, have also been forced to pay spiralling annual service charges> for their own homes. The crucial difference between retirement accommodation and nursing homes is that you own your home in the former, making moving difficult. However, faced with the prospect of a battle over fees, some people decide that they would rather sell up. Even then the property companies look to squeeze money out of residents, with many charging a 1 per cent “exit fee”.

Jim Cook, 77, lived in Royal Ness Court, Ness Walk, Inverness, until he moved out last year. He faced an exit fee of 1 per cent of his sale price, but decided that it was worth the £1,245 cost to leave the development, which was owned by Fairhold and managed by Peverel. He claims that the residents were treated poorly by estate managers and were overcharged for buildings insurance and the 24-hour telephone support service.

The hefty fees have not gone unnoticed by the regulators. The Office of Fair Trading (OFT) has written to 26 retirement home companies, warning them that exit fees could be considered “unfair” under the Unfair Terms in Consumer Contracts regulations. It is investigating the industry after being inundated with complaints from residents who are appalled at the way that they are treated.

Mr Harrop says: “The action from the OFT is a good start, but it needs to investigate the full range of concerns about this industry. It must ensure that the sector becomes more transparent so people know exactly what charges they will incur when they purchase a retirement property.”

If you feel that charges levied by a retirement home company are not “reasonable”, you can apply to the Leasehold Valuation Tribunal (LVT), which has the power to reduce service charges and other annual fees and can demand that landlords pay backdated refunds. Some residents have successfully reduced the size of charges imposed by Peverel simply by contacting the relevant management team or writing to the company and threatening to go to the LVT.

David Burbridge, 78, from the Whittingham Court development in Droitwich, Worcestershire, was shocked to discover that residents in his block were being charged £11,700 to cover the rent on a two-bedroom flat for the house manager. “That would usually pay for a four-bedroom house in Droitwich,” he says. Mr Burbridge, who moved into the building three years ago, wrote to Peverel to query the claim and succeeded in reducing the rent to about £7,500.

As anger mounts, people have been forming campaign groups to highlight cases of overcharging and poor regulation. Hundreds of residents and their relatives have joined Carlex (the Campaign against Resident Leasehold Exploitation). It has the support of a number of MPs, including Edward Davey, the Liberal Democrat MP for Kingston & Surbiton.

Complaints about Fairhold and its sister company, the managing agent Peverel, account for the majority of the cases that Carlex hears about.

Both companies are part of the Consensus Business Group. The group also controls Cirrus, which provides careline telephone services for Peverel, and Kingsborough Insurance, which Peverel-run developments use for buildings cover. The company is also linked to McCarthy & Stone, the nationwide builder of retirement properties. It has an arrangement to purchase freeholds for new retirement developments from the builder.

However, Fairhold is not the only retirement home company that Times Money has received complaints about. Nick Hartland moved to Meadowbrook Court in Shropshire in 2003. He successfully fought the owner-manager, Leabrook Lodge, to have the annual management fee reduced.

Peverel insists that it “always aims to charge its residents fair prices for the quality of service that meets their needs”. It added: “Components of the annual service charge, including the provision of a house manager and his or her accommodation, are in the terms of the lease. It is important to note that Peverel Retirement has been asked to participate in less than ten tribunals regarding charges in the past three years. Staff at Peverel Retirement comply with best practice, including the Association of Retirement Housing Managers’ code of conduct.”

Sean Bellew, of Consensus Business Group, said: “In some cases rents have got out of line and, in the majority, these have been dealt with without recourse to LVT. We encourage residents to inform us if they feel that the rents are incorrect. If rents are challenged, we always review in detail and negotiate with residents to reach a fair and reasonable figure. We do everything in our power to avoid any legal action, but we are happy to defend our actions at LVT.”

If residents remain unhappy with the managing agent of their retirement block, they can seek to take control themselves under the Right to Manage rule. Under the Leasehold and Commonhold Reform Act 2002, residents can apply to take control of their blocks by setting up a limited company. They can then employ their own agent.

Checklist

Read your annual service charge invoice carefully and compare it with the previous year’s.

Look for newly introduced charges or escalating fees. If there is no obvious explanation, contact your managing agent.

Double-check that you are not being charged for items that are not referred to in your lease. It is likely that the lease will refer to “reasonable” service charges.

If you do not think that the fee is reasonable, challenge your landlord in the Leasehold Valuation Tribunal.

Source: ' Times '

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