Buying a retirement flat to renovate before selling current home

clement0123

Hi there
My parents would like to move closer to me. They have put an offer in on a retirement flat which they can buy from cash reserves. The plan is to completely renovate it so they can move in when it's ready without the stress and sell their main property in a separate transaction later. 
I understand they need to pay second home SDLT, which they can claim back if they sell within 36 months. 
My question is - are there any CGT implications they should be worried about? They will live in their current property until it sells so it will continue to be their principal residence. Obviously there's a risk that it doesn't sell and they choose to move to their retirement flat. Are there time limits in this situation that could result in a CGT liability?
Lastly, given the retirement flat is being fully renovated, will my parents have to pay council tax when they aren't living in it? 
Thanks in advance for your help!

Emmia

clement0123 said:

Hi there
My parents would like to move closer to me. They have put an offer in on a retirement flat which they can buy from cash reserves. The plan is to completely renovate it so they can move in when it's ready without the stress and sell their main property in a separate transaction later. 
I understand they need to pay second home SDLT, which they can claim back if they sell within 36 months. 
My question is - are there any CGT implications they should be worried about? They will live in their current property until it sells so it will continue to be their principal residence. Obviously there's a risk that it doesn't sell and they choose to move to their retirement flat. Are there time limits in this situation that could result in a CGT liability?
Lastly, given the retirement flat is being fully renovated, will my parents have to pay council tax when they aren't living in it? 
Thanks in advance for your help!

Is this a standard flat, or a purpose built retirement flat in a development for the over 50's?

Do be aware that the latter often loses money on resale and the management company may take a hefty slice of the proceeds at that point.

https://www.theguardian.com/money/2025/sep/09/developer-retirement-flat-sale-price

youth_leader

My heart sank when I saw 'retirement flat'.  My friend spent three years trying to sell her late Mother's retirement flat, and the monthly charges had to be paid in full during that time.  In the end she almost gave the place away, it was a very sad time for her.  Could your parents perhaps rent in assisted living near to you instead?  

silvercar

If they are buying second hand rather than new, a lot of the depreciation is already built into the price. 

Emmia

silvercar said:

If they are buying second hand rather than new, a lot of the depreciation is already built into the price. 

But not the charges like the one for each year's of ownership at the point of sale as outlined in the article I linked to.

Edit: I would read the lease and any associated documents VERY carefully before buying one of these places, and considering a range of "what if" scenarios.

bouicca21

The experience of friends who have inherited retirement flats has been variable.  One development had a waiting list of people trying to buy - close to shops and bus routes - and sold quickly. Others took well over a year to sell and the monthly fees still had to be paid, so as @youth_leader says, those places had to be practically given away

clement0123

Thanks for your comments. We have been looking for many years at retirement flats/villages so are fully aware of the pitfalls re service charges and fees on selling the property.  We have chosen a small development that was built in the 80s rather than a new build or large retirement village. Yes, we have to pay service charges if it was unoccupied, but this development doesn't have large fancy communal areas and grounds that need upkeep so the charges are less than a quarter of other local places, and no fee on sale. I will of course be reviewing the leasehold and services agreement in detail with our solicitor.

More my concern are the potential tax implications of doing this as two separate transactions- can anyone assist me with these please?  The looming budget is also a bit of a worry! Thanks

lincroft1710

Your parents will probably have to pay Council Tax on both properties as few councils give short term empty property relief. More importantly they will have to pay the second home premium which can be twice the standard rate..

danco

The thing about service charge and fees is that there are two scenarios.

I pay a huge service charge, but there are no fees on selling.

Other developments have a much smaller service charge but significant fees on selling. In effect these are deferred service charges. It's quite a reasonable argument to say that this means that the costs only arise on death or moving to a care home.