Ask the experts: should I buy a retirement flat for my mother?

One loveMONEY reader wants to know the drawbacks of buying a retirement flat for his mother. We put his question to the Campaign Against Retirement Leasehold Exploitation (Carlex).

Dear loveMONEY,

I am hoping to buy a retirement flat for my mother warden 24/7, communal areas, gated... that sort of thing] but have come across a few horror stories involving these leasehold properties.

These disadvantages seem to centre around: terms of the lease, difficulty of re-selling, being stuck with large increases in service / other charges, depreciation in property value rather than increase, who has right to manage the complex, exit fees on selling, and so on.

I was wondering if you had produced any articles about this kind of thing, or if you have any advice you could offer?

I don't want to be the one to lower an 86 year old lady into a very dark place on the end of a very long rope!

Thanks for considering my request,

Mark S.

Response from Sebastian O'Kelly, trustee at the charity Carlex.

Dear Mark,

Retirement properties in England and Wales are a dubious proposition.

Only two per cent of over-65s in these countries live in designated retirement properties, against 12% in the US and 17% in Australia.

Retirement properties have been the subject of two Office of Fair Trading investigations.

The first reported in September 2012 and concerned exit fees on sale for no service whatsoever. The OFT opined that these were "likely" to be an unfair contract term and an agreement was made to (mildly) limit their effect with some freeholders.

The second reported in December 2013 and concluded with a ruling of collusive tendering that 65 retirement sites had been scammed through a bogus bidding process that ensured electronic door entry contracts were awarded to Cirrus, a subsidiary of the dominant property management company Peverel, now called FirstPort.

The retirement housing sector does have reputational issues.

Leasehold property tenure – which is a tenancy – makes the elderly vulnerable to numerous monetising possibilities and the protections of leasehold law, which require collective action, are difficult to achieve.

Resale values of retirement properties are very volatile and they should not be expected to track the local residential property market in any way.

Resales are frequently 40 per cent less than the price paid when new, as this study from Carlex makes clear.

We frequently advise families who contact us to consider renting as an option – particularly if the elderly relative is in advanced old age – or to buy a resale rather than a new property as it will have already taken the worse hit to capital value.

Many families do suffer badly if an elderly relative goes into further care, in which case the costs of the empty retirement flat have to be borne, along with the extra care costs, subletting fees that may be in the lease, and letting agent fees. This can add up to a perfect storm of financial costs for families.

Unfortunately, in this country designated retirement properties remain a dubious proposition and by far the greatest number of pensioners downsize to ordinary, smaller, non-retirement specific properties.

I hope that helps, good luck with it.

Sebastian O'Kelly

Trustee

Carlex

Got a question you'd like answered? Drop loveMONEY an email on uknews@lovemoney.com and we'll do our best to help out.