There has been an enormous growth in seniors relocating to ‘retirement villages’ (small r, small v) in the last few years. Targeted at seniors older than 55 looking for independent living in a ‘community’ environment and generally downsizing, the villages often boast some form of central facilities for a range of services. The economic model thus far has been overwhelmingly towards leasehold properties, as this is potentially the only viable commercial framework. Their business models have been subject to multiple criticisms, and although they have sought to mitigate PR negativity, their bad practices continue. Retirement Villages (“RV”) is a serious offender, as outlined in what follows.
Misleading documentation can be an issue. For example, RV’s web site states “Subject to obtaining prior consent from the Landlord, minor internal alterations and improvements can be made”. However, the lease is unequivocally clear in obtaining a covenanted undertaking “Not to make any alterations whatsoever .. “
This is a clear and an absolute bar – read “whatsoever”. There is no caveat or rider regarding permission from the landlord, and any alteration would thus be in breach of the covenants given in the lease, which could result in it’s termination, unless a formal legal amendment had been made on changes. It is unlikely that the defence “but the web site said that that … ” would be valid in a court of law. So this is a clear case of making a representation to a buyer, when the legal binding covenants they seek to extract from that buyer is at variance; it’s called misrepresentation.
However, RV are at their most disingenuous in burying in the lease terms a grossly unfair and heinous condition, which because of its sneaky wording may well even be missed by the conveyancer acting for the buyer.
RV can declare that a tenant is, ” by reason of his medical condition … unfit to remain in occupation … bearing in mind the interests of … each of the staff” and then the 100+ year lease can be terminated and the tenant given 8 weeks to vacate the property. This condition is opaque, spongiform and subjective, and certainly not one a prospective buyer should risk being the victim of.
Note that the judgement of, for instance, psychological capacity, in not made in terms of some objective assessment, such as being found unfit under the Mental Capacity Act 2005 (the obvious more objective and accepted test for incapacity), but whether the tenant’s behaviour (for example) might have offended the gardener (“…each of the staff…”).
However not content with ejecting – legally – someone likely to be in a fragile mental state on to the street (which would against the law if the landlord was an unscrupulous rogue in Liverpool), in addition RV impose a massive hidden financial penalty on the hapless victim of their unfair termination clause.
On assignment of the lease following such termination, the leaseholder receives just 95% of the price originally paid ), and not the market value. Taking a case in point, a tenant entered into a lease on 2001 and paid £350,000 for the property which as at the time of writing, was advertised at £690,000. The owner had moved out into a care home of her own volition, and on sale of the property would receive 90% of the price paid. [The remaining 10% is an ‘assignment fee’, of which more later, for which the RV have been widely criticised.]
However, had the tenant been given notice by RV instead of moving voluntarily, the lease provides that they can receive only 95% of the price paid i.e. £332,500 out of a what would other have been a market price receipt of £621,000. So not only would an old, fragile, tenant been thrown onto the street from what they thought was their ‘home’ on 8 weeks notice, they would have suffered a £357,500 loss (see note 1 below).
RV have revised their procedures – after bad publicity about the practise – in relation to ‘assignment fees’, and have taken steps to not only make it visible, but to extract a written confirmation from a potential tenant that they have been informed of same. However, given past opacity on the issue, it rather has a whiff of defensiveness about it, rather than an attempt to be open. However, this candour is not reflected in the termination clauses for covenant breaches and alleged incapacity; the lease wording is legal sophistry.
This policy is just plainly and simply usurious, and executed on a tenant (and their family) in distress. RV should be ashamed, and anyone contemplating moving to a retirement home would be well advised to not consider this Company.
Note : It may be argued that the loss was illusory, since it was in fact an unrealised capital gain. 11 year olds making this argument may well be advised to check an intro economics book on ‘opportunity cost’.