Retirement flat 'sinking fund'

NeonWaves

I'm looking to buy and just about qualify for a retirement flat (in terms of age) After seeing a lovely flat, I returned to the property for a second viewing very keen to put in an offer, just deciding on how much. Same afternoon I rang the estate agent with offer (after discussing with frined who had accompanied me) and it was then that the estate agent said 'oh I have more information for you, those flats are subject to a 'sinking fund' of 2% of property value when you (or family) sell for each year you live there' 

Apart from wishing I'd known about this fund much earlier in the process (!) is the 2% a normal rate? I can't find much online about this. There doesn't seem to be a cap? I don't have kids (just a niece) so I'm not necessarily looking to make a profit to pass on but potentially, as I'm the lower age range, by the time it comes to sell could lose money? 

I'm annoyed with the estate agent as I feel it's crucial information needed to consider when offering, or indeed if. And means using valuable time trying to research the pros/cons of this. 
Any advice here or where I can get it please? Thanks

Keep_pedalling

I just Googled a couple of companies and one had a sinking fund of 1% on sale and the other 0.25% per year of ownership, so 2% per year of ownership is massive. If that is correct I would withdraw my offer these places are notoriously difficult to sell and it may not be your executors who have to deal with it but you if circumstances change and you have to sell in your lifetime, 

Flugelhorn

many of these flats have significant management and maintenance charges, to reduce these (or at least make them look less) they pile it into this sinking fund fee, so it is only paid later..  2% per year is massive - usual is more like 1% of the sale price etc 

NeonWaves

Flugelhorn said:

many of these flats have significant management and maintenance charges, to reduce these (or at least make them look less) they pile it into this sinking fund fee, so it is only paid later..  2% per year is massive - usual is more like 1% of the sale price etc 

The service charge is £217 per month (which apparently can go down as well as up!), so it's not even as if that's rock bottom to make up for it. 

youth_leader

I'm sorry you have had this disappointment.  If you search this forum for 'retirement flats' you will find many posts. 

Albermarle

There is a posh retirement village near to where I live. Swimming pool, gym, restaurant etc 
Monthly charge is £1200.00 with a 1 % pa deferred fee when you sell. Or a monthly charge of £650 and a 2 % deferred fee.

Not sure how well these properties sell, but some of the cheaper retirement flats do seem to be difficult to shift even with big price cuts. Especially if you buy new.

eddddy

As you say, 2% is at the high end. And the estate agent absolutely should have told you very early on - before you even viewed the property.

I guess you need to do work through the numbers, to see if it's "value for money"...

• The monthly service charge is £217 per month = £2.6k per year
• If, say, the value of the flat is about £300k, then 2% = £6k per year

• So total service charge per year = £8.6k per year

Does that seem reasonable for the services provided? How does that compare with other similar developments, with similar facilities?

During conveyancing (or maybe before) you could ask for copies of the accounts to see what the money is spent on.


Retirement property leases often include a lot of services which other leases don't, like...

• maintaining and replacing storage heaters, immersion heaters, etc
• maintaining and repairing electrics and plumbing
• unblocking sinks/toilets, fixing leaks, changing light bulbs, etc

So you might save money on plumber's bills, electrician's bills, handyman's bills, etc


Service charges for any leasehold property can go up or down (but generally up). It depends how much the services cost, how much repairs and maintenance is needed, etc




And if you weren't told about the 2% per year fee before you offered - you'd probably be justified in reducing your offer because of that.

GDB2222

When you say that you want a retirement flat, do you really need the sort of facilities offered, eg a warden, community facilities? These flats are often cheap to buy, but very expensive to live in, and if you’re an independent 55 year old you might be condemning yourself to great expense for many years. 

There are lots of blocks around here which have become populated mainly by retired people. There can be a good community spirit with residents looking after each other. All this without the price gouging from the retirement home companies. 

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. 

In your case, for example, you might need to go into an old age home and want to sell your flat to finance it. It’s not going to be much good if it takes you 2 or   3 years to sell the place. Worse still if the freeholders take 60-70% of the sale price. 

NeonWaves

GDB2222 said:

When you say that you want a retirement flat, do you really need the sort of facilities offered, eg a warden, community facilities? These flats are often cheap to buy, but very expensive to live in, and if you’re an independent 55 year old you might be condemning yourself to great expense for many years. 

There are lots of blocks around here which have become populated mainly by retired people. There can be a good community spirit with residents looking after each other. All this without the price gouging from the retirement home companies. 

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. 

In your case, for example, you might need to go into an old age home and want to sell your flat to finance it. It’s not going to be much good if it takes you 2 or   3 years to sell the place. Worse still if the freeholders take 60-70% of the sale price. 

I wasn't specifically looking for a retirement flat. It's very near another flat I enquired about and the estate agent flagged this over 55s flat to me. So I went to take a look at both at the same time. Another friend has also mentioned over 55s flats to me 'as they're cheap'. Now I've learned the truth I will steer clear! 
Thanks to all the comment on this forum. 

Flugelhorn

NeonWaves said:

Flugelhorn said:

many of these flats have significant management and maintenance charges, to reduce these (or at least make them look less) they pile it into this sinking fund fee, so it is only paid later..  2% per year is massive - usual is more like 1% of the sale price etc 

The service charge is £217 per month (which apparently can go down as well as up!), so it's not even as if that's rock bottom to make up for it. 

probably on the low end for flats TBH - probably more of the real maintenance charge is going into the sinking fund charge . I know of one where it is above 5K (bit there are quite a few services included )

Albermarle

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) .