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Selling retirement properties - what are the hidden costs?
Properties geared towards over 55 year olds are becoming increasingly popular. These types of properties have a number of advantages, which are easy to market and draw in a lot of interest for this age group, such as:
- The benefit of a house warden
- Ready made communities of like minded individuals
- Organised social events
- Residents lounges and other shared facilities
- Gardens and landscaped areas
- Guest suite available to visiting family members
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However, as well as marketing the benefits, it is important to be clear on the costs relating to these types of properties.
Usually, this type of property goes on the market when the owner dies. The beneficiaries are normally completely unaware of the need for certain fees to be paid upon the sale of the property.
Retirement properties usually require an ‘exit fee’ to be paid, which will usually be a percentage to be paid from the sale price. This can sometimes amount to a significant sum of money.
In addition to the fee mentioned above, the service charges paid in relation to the property will still accrue during the marketing of the property and will become payable on the sale.
There may also be assignment fees and other costs which will be listed in the lease.
This type of property may be managed by a residents association, right to manage company, or even the freeholder. Occasionally, sales can be held up due to the length of time taken to obtain a full breakdown of the fees that apply.
Therefore, it is worth asking the seller’s or the seller’s relations, to obtain the full details of the charges before a sale is agreed. This way, the conveyancing process will move quicker.
It would be prudent when marketing the property to highlight these charges to a future buyer. At least this way the buyer is fully informed of the charges early on, and if they are too expensive, then a buyer is not lost half way through the purchase.
Crucially, on some occasions a large assignment fee is payable by the buyer upon completion, as opposed to the outgoing seller. In this type of situation, it is important that the buyer is made aware of this at the outset, as further negotiations regarding price may need to take place, depending upon the level of contribution.
Recently, buyers challenged this fee (Burrell v Helical (Bramshott Place) Ltd 2015); however the issue remains to be litigated on, however it is unlikely that the buyers will be successful.