Buying a retirement flat

retirement flatRetirement flats provide many positives. They offer a ready-made community, a house warden to provide care in an emergency, and often social facilities and residents’ lounges. Some even provide cleaners and meals.

They can be an ideal lifestyle choice for couples who find their health is not what it was and individuals who have recently lost a partner. The presence of 24-hour care can be a literal life saver. But although they seem to offer the perfect answer for a carefree old age, are they a good buy?

Despite growing popularity, and some excellent properties available the answer may sometimes be no. We look at why you need to check carefully for costs hidden in the small print.

Ground rents

Ground rents are payable on all leasehold properties in England and Wales. The ground rent on retirement homes tends to be high, and in some cases, liable to annual review. With some developers, you could be tied in to costs that might become a problem in a few years’ time.

However, the Government is planning to ban leasehold on most new homes and prevent developers from charging ground rents.  Quite how this will be applied to retirement homes is still being debated. It may be that in the future, ground rents won’t be an issue for new homes – retirement or not – but you need to ensure any costs are reasonable now.

Service charges

It is reasonable that service charges are higher than with ordinary flats. Retirement flats can offer a whole range of services from social facilities to on-site personal care teams ready to help around the clock and even meals and laundry services. These are all convenient, but they can mean high service charges. Check the service charge carefully. Some developers are much more reasonable than others.

A loss making property

Unlike most other types of property, retirement flats can tend to go down rather than up in value.

New flats sell at a high premium and some will depreciate dramatically. To make things worse, retirement flats can be difficult to sell. They may go back on the market when the owner dies, but as the property is restricted to retirees, the number of potential buyers can be small.  Service charges keep being imposed until the property sells, which can sometimes take months or even years unless the beneficiaries take an offer below the original purchase price.

Some freeholders even make it a condition of resale that you must sell through them, at a higher percentage than ordinary estate agents charge. Many will also charge an exit fee. Although some developers make only a minimum charge, essentially as a way of funding shared areas, with others the exit fee can be as much as 30% of the resale price.

Do your research

If you or someone you are close to is considering buying a retirement property, it is essential to look very carefully at every aspect of the purchase. Check what charges are specified in the lease and remember that if it has fewer than 85 years to run, it will be very expensive to renew. The value of the property will continue to decrease as the lease wears down.

Once you are aware of the negatives, it’s easier to buy a home that will hold its value and offer reasonable costs. There are some very good providers of retirement properties, which offer quality builds in good locations, reasonable costs and all-round value. As always with property, you need to look very carefully at what is on offer and get professional advice.

At Continuum, we can help you look at retirement property purchases, as well as all other aspects of financial planning in your later years.

The value of investments can fall as well as rise and you may get back less than you invested.

Get in touch

If you would like to discuss further please call us on 0345 643 0770, email us at [email protected] or click on the ‘Contact Us’ link below. Thank you.

Let's talk

If you want to get a free consultation without any obligations, fill in the form below and we'll get in touch with you.









    Sign-up to our free weekly online publication