Owning two retirement flats

SandySmith

My mother bought a flat in a serviced retirement facility last year, but she wants to move.  It will take a long time to sell, but she has just enough savings to buy another retirement flat in another town.  We've talked through the issues like paying two sets of service fees, and leaving a property empty, and having no nest-egg left.  What I'm not sure about is what her liability would be as effectively a second home owner?  Does the fact the first flat would be on the market make any difference?  And are their tax implications if she dies before the first flat sells?  Also, is there anything else we should consider?  None of my family have ever owned two homes before.  Thanks.

DE_612183

higher stamp duty initially - but that can be recovered.

you may need to also look at insurance if one flat is not being lived in.

think that's it really - only other downside I can see is if she ( lets hope not ) passes whilst in possession of two flats it'll take a while to sell both...

Yorkie1

If the property is in England, then when she buys flat 2, she will pay extra stamp duty land tax (SDLT) as it is a second property. If she sells F1 within 3 years, she can reclaim the extra tax paid.

I suspect there may be extra council tax implications for flat 1 once it is no longer occupied as a primary residence, but am not sufficiently sure of the details to suggest what they may be.  It may depend on the approach taken by the local council, perhaps. I don't think that the flat being on the market would be relevant, but am not 100% sure.

If she passes away before flat 1 sells, then the biggest risk is if that occurs if contracts have been exchanged but completion has not taken place. So if there are concerns about her health, you might be well advised to keep the period between the two to a minimum (but it is usually unrealistic to expect them to take place on the same day).

Albermarle

I guess you are aware that retirement flats can be a very poor investments, and can be very difficult to sell.
Especially if you buy new.

lincroft1710

She will probably still have to pay Council Tax on the old flat as few councils now offer short exemption. There is no 25% Single Person Discount for second homes and if the flat fails to sell within 12 months then the second home premium becomes payable. There may be utility standing charges and in any case the flat should have some background heat on over winter.

theartfullodger

CGT when sold on the one she does not live in, assuming value increases enough.  Insurance a problem.

RAS

Might it be better for her to rent a retirement flat where she now wants to live? That way even if she dies, the estate's liability for on-going service fees on the new flat is reduced to the tenancy period.

There've been enough stories about estates being entirely swallowed by the service fees on one flat to make owning two a poor idea. And if you are going to be executor, I'd be tempted to renounce promptly.

silvercar

theartfullodger said:

CGT when sold on the one she does not live in, assuming value increases enough.  Insurance a problem.

When these sort of flats sit on the market the perceived value drops rather than increases, so CGT may not be an issue. 

Insurance in an unoccupied property can be an issue, though in a well maintained block of flats may be less of an issue. With limited furnishings and building insurance provided through the service charge, the need for decent contents insurance is limited.

Bigphil1474

Having read some of the horror stories, some on here, about people being unable to virtually give away retirement apartments after probate, I'd be very wary of owning two. I agree with RAS above, rent the second one until the first is sold? The extra stamp duty will be significant, and you can only claim it back within 3 years. Personally, I'd prefer a good nest egg and pay some rent, rather than be lumbered with the 2 flats. Only caveat is if you know they would sell well. My auntie had one down south a few years ago and when she died it sold within a month of going on the market.