Retirement flat 'sinking fund'

gm0

In any estate development with small blocks of flats, gates, intercoms, lifts in each block.  There are signficant annual costs.  And then at replacement of major stuff - significant capital requirements for replacement.  This has to come from somewhere.  And the somewhere it comes from is the long lease flat owners.  (Who may or may not be share of freehold owners as well)

You can have simple leases - 999 years.  And obligation to pay service charges.  Which leads to:

- Some sites explicitly do not save up and just pay when costs happen - big bang
  A Section 20 notice drops on leaseholder mats.  We need 100k / N from each of you.  And we need this capital NOW.  This can make things look good in the early years when nothing much happens.  Low service charge bills for insurance and common energy. And maybe lift contracts for rescue and a regular fire inspection. Not much else. 
And then looks terrible later when big bills are looming up.  Perhaps depressed prices or unsaleable. Or just disappointed new buyers who receive the big bill, have questions and rather consider prior owners as freeloaders
But caveat emptor.  It's not in long term leaseholder interests really.

- Some have deferred to sale levies as here - based on duration of occupation (which is actually fairer if you think about it) than being hit or not by a sizeable Section 20.  Like this. More of the funding is now "secured" in a way that doesn't demand money out of annual income. But the cashflow can still be a problem if people don't rotate out. 
And people - as in this thread - usually hate instinctively it viewing it as confiscatory of their rightful disposal on sale money.  Ignoring that they haven't paid what is needed to maintain the place.

The *reality* is they are just paying what they should pay - in a particular way

- Some have a higher service charge including a saving up for long term things - sinking fund levy paid each year. 

Oh no - now the service charges on this site are "too high".  My flat is unsaleable vs comparators - cut the charges immediately.

I think the likely "correct" solution is a mix - saving up a bit - reserves.  And section 20 overlaid for some events or chosen projects.   The deferred levy on sale method has a bad reputation from retirement village farming by commercial interests doing build and run of that.  

Even if you save up.  Something unexpected can show up and eat the reserves.  Ukraine and energy bump onto construction has doubled the cost of a lot of stuff. So it throws ancient estimating out of whack.

I know a few sites where we probably need a one off 10k from each leaseholder - to actually go after a number of the projects that they would like to see happen - but are rather less keen to pay for.  Choice. Consequence. 

With share of freehold - it's a democracy and the defer it until after I'm dead crowd get a vote alongside the keep it nice and do it now crew.

Bostonerimus1

The sellers of these "retirement flats" are having a laugh. It's similar to the worst leasehold situations - IMO. I would never buy anything with such financial strings. The OP is well out of it.

GDB2222

Albermarle said:

Another friend has also mentioned over 55s flats to me 'as they're cheap'.

Buying a second hand one can be good value it terms of just the purchase price, as new ones lose a lot of value. More like buying a car than a property.

There have been plenty of people posting here about their difficulties selling retirement flats, because it is so difficult finding people prepared to pay the ongoing costs. 

Also I think there is an oversupply, and there is a more restricted buyer base than usual ( only older people) .

I think it’s a very restricted buyer base. The buyers need to require the services provided, so perhaps not be in the best of health. But they need to have the energy required to sell their present home, throw away loads of their stuff (because these flats are usually small) and move. Plus of course they need to have the funds to buy and pay the ongoing costs. 

katejo

I am 61 and currently have a terraced house which I own outright. I am thinking about plans for retirement. If I were to become less mobile, I might have to move but I am dreading it because of all the problems with leasehold and retirement flats. My stairs are narrow and not suitable to fit a stairlift!

GDB2222

katejo said:

I am 61 and currently have a terraced house which I own outright. I am thinking about plans for retirement. If I were to become less mobile, I might have to move but I am dreading it because of all the problems with leasehold and retirement flats. My stairs are narrow and not suitable to fit a stairlift!

Could you not move to an ordinary flat, though?  Either, ground floor, or one with a lift?

All flats need maintenance, same as your current home. Try to find a flat where the leaseholders manage the block themselves.

Albermarle

GDB2222 said:

Albermarle said:

Another friend has also mentioned over 55s flats to me 'as they're cheap'.

Buying a second hand one can be good value it terms of just the purchase price, as new ones lose a lot of value. More like buying a car than a property.

There have been plenty of people posting here about their difficulties selling retirement flats, because it is so difficult finding people prepared to pay the ongoing costs. 

Also I think there is an oversupply, and there is a more restricted buyer base than usual ( only older people) .

I think it’s a very restricted buyer base. The buyers need to require the services provided, so perhaps not be in the best of health. But they need to have the energy required to sell their present home, throw away loads of their stuff (because these flats are usually small) and move. Plus of course they need to have the funds to buy and pay the ongoing costs. 

Not always small.
24 Hillcrest House | Retirement Properties | Audley Villages

Skiddaw1

I think it really does depend on the circumstances. Our previous neighbours sold up and moved to a retirement complex in our local town and they love it. The grounds and communal areas are well-kept, there's plenty going on, they're in an extremely convenient location for shops, cafes, surgery, busses, etc, and they've made friends with many of the other residents.

It's a bit like Park Homes- it's not for everyone but it can work really well.

Maahes

katejo said:

I am 61 and currently have a terraced house which I own outright. I am thinking about plans for retirement. If I were to become less mobile, I might have to move but I am dreading it because of all the problems with leasehold and retirement flats. My stairs are narrow and not suitable to fit a stairlift!

I bought a house with bedrooms and a bathroom on the ground floor because two members of my household have arthritis and can no longer climb stairs comfortably.

GDB2222

Albermarle said:

GDB2222 said:

Albermarle said:

Another friend has also mentioned over 55s flats to me 'as they're cheap'.

Buying a second hand one can be good value it terms of just the purchase price, as new ones lose a lot of value. More like buying a car than a property.

There have been plenty of people posting here about their difficulties selling retirement flats, because it is so difficult finding people prepared to pay the ongoing costs. 

Also I think there is an oversupply, and there is a more restricted buyer base than usual ( only older people) .

I think it’s a very restricted buyer base. The buyers need to require the services provided, so perhaps not be in the best of health. But they need to have the energy required to sell their present home, throw away loads of their stuff (because these flats are usually small) and move. Plus of course they need to have the funds to buy and pay the ongoing costs. 

Not always small.
24 Hillcrest House | Retirement Properties | Audley Villages

Okay, not always! Interesting that that has a 2% annual charge, on top of £975 per month. (Notice how they have kept that just below the magic £1000 figure.). A total of £45k pa. Do they have to provide service charge accounts adding up to that amount?



These things really are a rip off, preying on the elderly. 

Murphybear

Have you thought about renting?  If you don’t need to leave the flat to anyone it might be a solution.

We live in an over 55s charitable Housing Association development.  There are 33 flats and one 3 bedroom house (which we live in)

The rents are less than private rentals and include all the maintenance costs and service charges.  As it’s a registered charity they don’t rip people off.  We have assured tenancies so we have security.  The service charge includes, as well as the usual things like gardening and cleaning, unlimited use of professional Miele washing machines and driers.   We have a very large communal lounge with its own kitchen.  Great for parties.   We’ve been here for nearly 7 years and have made some great friends.

For those on lower incomes and/or not huge savings they are happy to take housing benefit.  We have a court manager for 5 days a week and he sorts out any problems, large or small. 

They have developments all over England but not in the rest of the U.K.  There are longish waiting lists for areas like Bournemouth or the  Isle of Wight but some developments but further away from the coast they can be fairly short.

its not for everyone but we love it.