Gardner Leader

Robert Parsonson, Conveyancing Associate at Gardner Leader Solicitors, reports on the sale of retirement properties and an unexpected fee that can crop up within the lease.

A number of times over the last few months I have acted for the sale and purchase of leasehold retirement properties and a certain issue has arisen that has caused my clients some concerns. 

It is regarding a clause within the lease that allows the Landlord of the building to charge the property owner a transfer and/or contingency fee whenever the property is sold, or in some cases re-mortgaged or just transferred.  These fees are commonly 1% of the property value and, in a few cases, I have seen 2 different fees charged for a total of a 2%.  In addition, these clauses state that if the seller does not pay these fees, the purchaser of the Property will be liable, making it very important to deal with these when acting for a purchaser as well as a seller.

As these fees are primarily found in retirement properties, they are aimed at those over the age of 55. There have been calls that these charges are unfair and should not be enforced.  During a recent purchase, the solicitors acting for sellers of the house that my clients were purchasing, supplied a press release from the Office of Fair Trading (OFT), stating that the national builder McCarthy and Stone Plc have agreed that in future sales of their properties these clauses would no longer be included and in addition they would not enforce the clause in their existing leases.  As the lease I was purchasing was an old McCarthy & Stone property, the sellers’ solicitors stated that the seller would not need to pay the fees. 

Unfortunately, it was not as straightforward as this because McCarthy & Stone were no longer the Landlords.  Typically, once the builder has completely finished the development, they will sell or transfer the freehold to another company or to the management company. It is then that these companies claim the fees should be paid. 

The key point is that, as these fees are contained as a clause in the original lease, the companies are fully within their rights to claim them and the sellers are legally bound to pay them. 

One of my clients questioned whether, as the OFT were involved, this would overrule the clauses in the lease?  This was an interesting question, which led me to research exactly what had prompted the OFT to have discussions with McCarty and Stone. 

Over the last few years the OFT has engaged in a homebuilding market study to examine people’s experiences when purchasing new-build properties. The results found that causes for complaint were not only attributed to faults with new homes, delays in repairing the faults and delays in the conveyancing process, but also to issues around the sales process itself, including the handling of reservation fees and potentially unfair terms in contracts and leases, such as the transfer and contingency fees in question.

As a result of this study (which is still continuing) the OFT is pushing and working with the builders, the National House Building Council, Zurich and other bodies involved in building new properties to create a voluntary code of conduct.  This code is not only to be aimed at the actual construction of new properties, but to the conduct of the whole process.

The first step has been for the OFT to push for the creation of a body capable of administering the code.  Progress is being made in this regard and the goal is for the code to be established by March 2010, although an exact date is not given.  

So, where does this leave my clients and the payment of the transfer fees?  For the moment, they remain legally bound to pay them.  Whether this will change in the future will depend on exactly what code the OFT and the industry deliver and whether those Landlords who are not in the building industry also agree not to enforce these types of fees.