Why Are Retirement
Flats Not Selling?

The target market for retirement property consists of individuals who fall into a specific age range. Many properties are therefore only available to people over the age of 60.  However, some companies sell to individuals aged 50 and over.

This means – in most cases – that it’s only possible to sell a retirement flat to a limited “pool” of buyers. It can also be very difficult to sell these properties via a traditional or online estate agent.

Note that there are some sales companies that specialise in transactions of this kind. Some developers also offer to “buy back” the retirement properties they’ve built.  However, generally speaking, the choice is limited.

It can be difficult to get a mortgage for the purchase of a retirement flat or house.

This is mainly due to lenders being fully aware of the saleability risks that come with these kinds of properties in the future.

Note that – whilst there may be some specialist lenders that would consider retirement flats – the mortgage pay rates are likely to be higher and more of a deposit is required.

Due to retirement flats’ limited demand, they tend to not retain their value as much as other houses and flats. There have indeed been many reports in the mainstream media of these flats selling for significantly under the original sale price.

If the property falls into negative equity, it becomes very difficult to sell unless the vendor is willing to put in his/her own capital to make up the shortfall.

Typically, however, if 10 to 15 years have passed without any major property crash, some kind of price increase can be expected.

The majority of retirement properties come with service charges for the upkeep of buildings, amenities, extra facilities and management.

While the need for these service charges is understandable, they can be off-putting to potential buyers – particularly as the charges are often more expensive than typical leasehold properties.

Some retirement building freeholders also impose variable service charges. These obviously cause concerns that the costs of ownership will probably rise.

It’s also worth noting that many of the building developers sell off the freeholds to independent companies. When they take over, the management of service charge payments can end up being very profit driven.

At the same time, however, the UK’s largest retirement home developer – McCarthy Stone – started to retain its “headleases” in 2010.  This means that there are limits on how much service charge increases can go up.

Remember that, ultimately – if service charges payments are not met – the lease may end up being forfeited (and reverting back to the freeholder).

Ground rent is an annual charge paid to the freeholder of the property each year. While much lower than the rent charged by landlords, this fee adds to the existing expense of living in a home of this kind.

However, this is changing…

New regulations regarding this charge depend on the age of the property. While residents of an older home on a long lease may be required to pay ground rent, as of April 2023, only “peppercorn” ground rent can be charged on new retirement flats or houses.

Various charges – or “assignment fees” or “transfer fees” – may be applicable to residents of retirement properties. Anything from resale to sub-letting can also incur significant (and often unexpected) costs.

These amounts often depend on how long the resident has been in situ, and are usually calculated as a percentage of the market value of the home.

It’s worth noting that, in most cases, monthly service charges do not cover council tax obligations.

Unoccupied retirement properties are also subject to “empty property” council tax at a higher rate.

Owning a leasehold retirement flat is very different from residing in your own freehold property. Freeholders have ownership of their property and the land on which it stands for an indefinite period of time. Leaseholders own the building, but not its land.

Many retirement flats are sold on a long lease of either 99 or 125 years. Some very long leases extend to 999 years. This latter arrangement is often preferable to a short lease, as it provides more security.

Having to pay an exit fee (also known as “deferred management fee” or “event fee”) is a significant drawback of owning a retirement flat. This is applicable when the resident leaves the property or passes away. These charges can reach as high as 30% of the open market value or resale price.

When the time comes for a resident’s bereaved family to sell their father or mother’s flat, for instance, they may find themselves faced with costs that they cannot easily cover.

Alternatively, if the resident decides to move home, they may find themselves paying far more than the standard price for selling property via estate agents due to these fees.