Retirement Village Life: Your Own Thursday Murder Club?
the Thursday Murder Club The books may have been a huge financial success for their author, TV presenter Richard Osman, but I suspect they have also helped the performance of the retirement village industry.
In the books, a group of aging residents of the luxurious Coopers Chase Retirement Village meet weekly to tackle unsolved murders. The four famous geriatrics – formerly a nurse, psychiatrist, secret service agent and union leader – find plenty of adventures together, not to mention the occasional murder victim at the scene.
Blood on the carpet may seem like miscommunication for the industry, but the books help explain why an increasing number of my clients are moving into these resorts – with the lures of pampering, luxury comfort and, above all, company.
These properties are not cheap. You can easily pay close to £1million for a two-bedroom apartment, and in central London I’ve seen some go for £3million.
The people who can afford to live there are often successful professionals with lots of interests and good company themselves. Many have abandoned a large family home, allowing them to give money to younger generations as part of their estate planning or to free up capital to live on.
There are many benefits to this lifestyle. With no grounds to maintain and people and staff around to keep an eye on your property, you can lock the door and go on a world cruise or a three-month vacation without worrying that the lawn will turn into a jungle.
One of my clients has a terminal condition. Moving to a one-story apartment made perfect sense for him and his wife. He knows his wife will quickly make friends there and have a community around her when he dies – and that she will be somewhere safe if she is widowed for, say, 25 years.
It is also comforting for their adult children. The fact that there are maintenance staff on hand to deal with things like leaky faucets means their visits can focus on quality time with mom rather than a to-do list. The village also has a guest suite for visiting relatives, but at a cost.
The facilities are the main attraction for other buyers. Some places have a club with swimming pool, gym, tennis courts, spa, bar and a restaurant that serves meals from breakfast to dinner. You don’t have to cook, and you don’t even have to shop if you can’t or don’t want to. These facilities are a good place to gather to make friends.
Of course, all of these luxuries come at a cost – and not just the purchase price of the property. It is important to know what you are signing up for. There are downsides that might surprise you or your loved ones later if they are not budgeted for or anticipated.
Most retirement villages charge a monthly service fee. This covers exterior maintenance of the house, grounds and facilities, as well as club membership. We analyzed the charges for each property from one of the largest operators. For a two-bedroom property, monthly charges range from almost £500 to over £1,000, increasing each year with RPI inflation.
There are often annual parking fees – up to £2,024 (but often nothing) – and some properties charge ground rent of up to £500 a year.
Many retirement villages will provide a package of care, with home care and welfare visits charged in line with the fees you would expect from a high quality provider elsewhere. This may be enough, but if you should need serious care, you may still need to move to a specialist nursing home.
Be aware that it is likely that you will be asked to pay membership fees even if you are bedridden and cannot use the facilities or move into a nursing home while keeping your possessions. Once you die, your loved ones are obligated to pay the costs until the property is sold.
Perhaps the most controversial accusations relate to what happens when you die or want to leave. Many of these villages insist on what they call “deferred management fees” and exit fees. It is payable upon the sale of your home or a change of occupant.
Carriers argue that these fees help keep monthly charges lower. Many of these villages are built around large historic buildings, which can be expensive to maintain. A company used by one of my clients typically charges 1% of the sale price for up to a maximum of 15 years of your residence – in other words, up to 15% of the sale price.
I’ve seen places that charge even more. A central London operator charges 4% per annum up to a maximum of 28%. So that’s £840,000 on a £3m house after seven years of living there. (And that’s on top of a £1,485 ‘membership fee’ and £3,750 a year parking – £21,570 a year running fee.)
Also expect a sales administration fee. Generally, this can be 1% of the sale price or market value. A sales agency commission of 2% may be applied — plus VAT — if the operator markets the property.
Despite Richard Osman’s best efforts, the secondary market for these properties is small – you usually have to be at least 55 and sometimes 65 to buy them. This means that the resale value may turn out to be disappointing.
Often these sites are developed over time. Early units may become harder to sell as new ones come into production. If you are buying, ask to see the layout plans. Will your village soon start to look like a bustling city? Will the facilities become so crowded that you can’t swim more than two strokes in the pool without hitting someone? Will that pretty field where you walk the dog – assuming you have the right to do so – soon be a construction site?
When purchasing, consider instructing your own attorney – to avoid conflicts of interest, such as highlighting all potential costs. Operators can suggest in-house attorneys with the lure of reduced fees. I have come across examples where operators offer to sell your house so that you can move in immediately, but for 10% of the proceeds.
Reputable operators are likely to be members of the professional body, Associated Community Retirement Operators (Arco). This should give you confidence in their integrity – but sales teams are always there to sell, and you may be at a vulnerable point when making the decision to buy a home. If you can, you may want to involve your family in the decision. The most crucial thing to remember is that this is not an investment but a lifestyle choice. And for many, it’s a good choice.
My clients went there with their eyes open. They understand the costs and their families too. Most are very happy with their decision. No one has yet started sleuthing or found a murder victim at the scene. Or, at least, not one they told me about.
Charles Calkin is Senior Financial Planner at James Hambro & Partners, Wealth Manager