Leasehold Details Can Prove Costly for Retirees

With an ageing population, purpose-built retirement properties are becoming more and more prevalent. It is important when considering the purchase of such a property to look very carefully at the detail of the contract (this is normally in the form of a long leasehold) and, in particular, to understand the implications of clauses which relate to future events as well as those with more immediate impact.

A recent case illustrates the point.

It involved residents of a retirement village in Hampshire who wished to sell properties they held under long leases. They were appalled to discover that under the terms of the leases they were required to pay to the landlord up to 15 per cent of the open market value of the property on a resale.

The owners of the leaseholds claimed in court that those provisions were unfair under the Consumer Credit Act 1974, arguing that the leases were consumer credit agreements because the resale fees were a form of deferred payment to the landlord.

That argument failed because the leases did not mandate a specific amount that would have to be paid: no debt was created under the original contract for sale, so there was no ‘credit agreement’ created.

However, the leaseholders are not giving up. They are now claiming that the surcharge on resale is an unfair contract term under the Unfair Terms in Consumer Contracts Regulations 1999.