There are many attractions to buying a retirement flat; a small community of individuals in the same stage in life, often having additional facilities, some communal services and the possibility of handyman and other support services – all of which help make life a little easier.
However, retirement flats also come with some problems. Here are my six pointers on what to look out for:
1. Rising ground rents. Many retirement properties have ground rents that rise significantly over time. The government is presently consulting and intends to legislate banning future developments from having steeply rising ground rents. If this legislation is passed then it is likely that existing properties with rising ground rents will be adversely affected in terms of their value when you come to sell.
2. Some retirement properties come with leases that require you to use the freeholder or management agent’s own selling agent when you wish to sell.
3. Some leases give the freeholder the right of first refusal on a sale. Although you can find your own buyer and use your own estate agent once you have found a buyer, you have to allow the freeholder the chance to match the price with a buyer of their own. Obviously, this causes uncertainty and delay and can put purchasers off.
4. The lease may require you to pay the freeholder a percentage or other payment when you come to sell the flat. This can be 1 percent and may be higher.
5. Many retirement flats have short leases. The length of lease in our experience is increasingly becoming a significant factor in a buyer’s willingness to purchase. The length of lease that the buyers expect has also increased.
6. Although you will have a right to extend your lease if you have owned the flat for two years or more before you sell, the costs can be significant. The higher the ground rent and the shorter the term, the greater will be the cost of a lease extension. If the lease term is less than 86 years, the cost jumps significantly.
If you are thinking of purchasing a retirement flat, get in touch with our experienced team today. We are experienced in the purchase of retirement flats and will advise you on the precise terms of the lease and the potential pitfalls.