Contingency and transfer fees when selling a property in a retirement complex

Buying a leasehold property can be daunting at the best of times as property leases are subject to more restrictions and terms than a freehold.  However, moving into a flat in a retirement complex is often an essential choice later in life.

There are some unique features to a lot of retirement property leases that you need to consider before deciding to purchase.

The typical cost of contingency and transfer fees

One of the main factors is that such leases often impose contingency and/or transfer fees. These fees are payable by the seller on completion of your purchase and are usually set at 1-2% of the property value, though this can vary. Although you are not liable to such fees until such time as your retirement property is sold, it is very important to be aware of them before you buy because of the extra costs and potential complications involved.

Why contingency and transfer fees are charged

A contingency fee is payable to the landlord of the complex who is responsible for the complex as a whole.  The fee is paid into a reserve fund which the landlord will use to offset the costs of any future maintenance works to the development.  A transfer fee works exactly the same way but this is instead paid to the management company responsible for looking after the complex.  Some developments divide up the responsibilities between a management company and a landlord so this is what triggers the payment of both the 1% contingency fee and 1% transfer fee.

Ensuring your Executor and family are aware of the future liability

One of the issues we often see in relation to these fees arises when the property is sold upon death.  Executors can be surprised at the unexpected additional charges imposed by the lease and often worry that their family members/friends have been ill advised or taken advantage of.  We would therefore recommend that you consult with your Executors/family regarding these fees as these will need to be paid by your estate on a future sale. This will help avoid an unexpected surprise at a potentially difficult time.

We do offer specialist legal advice in relation to the purchase of retirement properties and you should always address any concerns regarding these fees or any other lease terms prior to exchange of contracts.