That Thursday Murder Club Books may have been a huge financial success for their author, TV presenter Richard Osman, but I suspect they also contributed to the performance of the retirement village industry.
In the books, a group of aging residents of the luxurious Coopers Chase Retirement Village meet each week to solve unsolved murders. The famous four elders – formerly a nurse, a psychiatrist, a secret service agent and a union leader – find many adventures together, not to mention the occasional murder victim, on the premises.
Blood on the carpet might seem like bad PR for the industry, but the books help explain why a growing number of my clients are moving to these complexes — with the attractions of grooming, luxurious comfort, and most importantly, camaraderie.
These properties don’t come cheap. You can easily pay close to £1m for a two-bedroom flat and I’ve seen some cost £3m in central London.
The people who can afford to live there are often successful professionals with many interests and good company themselves. Many have traded down from a large family home to give money to younger generations or free up capital to live on as part of their estate planning.
This way of life has many advantages. With no need for maintenance, and with people and staff keeping an eye on your belongings, you can lock the door and embark on a world trip or three-month vacation without worrying about the lawn becoming a jungle.
One of my clients has an incurable condition. Moving to a ground floor apartment made perfect sense for him and his wife. He knows that when he dies his wife will make friends there quickly and have a community around her – and that she will be in a safe place when she is a widow for 25 years, for example.
It is also comforting for their adult children. The fact that maintenance staff are on-site to take care of things like leaky faucets means their visits can focus on spending time with mom instead of going through a job list. The village also has a guest suite for visiting relatives – albeit for a fee.
The facilities are the main attraction for other buyers. Some resorts have a club with a swimming pool, gym, tennis courts, spa, bar and restaurant serving 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 this luxury has its price – 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 not budgeted or anticipated.
Most retirement villages charge a monthly service fee. This includes off-site maintenance of the home, grounds and facilities, and club membership. We analyzed the fees in each facility of one of the largest operators. For a two bedroom property the monthly fee ranges from almost £500 to over £1,000 and increases every year in line with RPI inflation.
There’s often an annual parking fee – up to £2,024 (though often nothing) – and some properties charge a base rent of up to £500 a year.
Many senior villages offer a care package that includes home care and social assistance visits at rates that you would expect from a quality provider elsewhere. This may be enough, but if you need serious care you may still need to move into a specialized nursing home.
Note that even if you become bedridden and cannot use the facilities or move into a nursing home, you will likely be asked to pay membership fees, but can keep your belongings. After your death, your dependents are obligated to pay the fees until the property is sold.
Perhaps the most controversial allegations relate to what happens when you die or when you want to leave. Many of these villages insist on what they call a “deferred administration fee” and an exit fee. This is due when you sell or move house.
Operators argue that this fee helps keep monthly fees lower. Many of these villages are built around magnificent historic buildings that can be expensive to maintain. A business used by one of my clients typically charges 1 percent of the retail price for up to a maximum of 15 years that you live there – in other words, up to 15 percent of the retail price.
I’ve seen places that ask for even more. One operator in central London charges 4 per cent per year up to a maximum of 28 per cent. So that’s £840,000 for a £3million house after seven years there. (And this is on top of a ‘membership fee’ of £1,485 pcm and £3,750 per parking charge – £21,570 per year in ongoing charges.)
Expect a sales management fee, too. Typically this can be 1 percent of the selling price or market valuation. A sales agency fee of 2 percent – plus VAT – may be charged if the operator markets the property.
Despite Richard Osman’s efforts, the secondary market for these properties is smaller — you usually have to be at least 55, and sometimes 65, to buy them. That means resale value can be disappointing.
Often these websites are developed over time. The earlier units may be more difficult to sell as newer ones come on stream. When you buy, ask about the development plans. Will your village soon feel like a busy city? Will the facilities be so crowded that you can’t swim more than two strokes in the pool without bumping into anyone? Will the beautiful field where you walk the dog – assuming you’re allowed to – soon be a construction site?
When buying, consider hiring your own attorney – to avoid conflicts of interest e.g. B. Showing all potential costs. Operators can propose in-house counsel with the lure of discounted fees. I’ve come across examples where operators are offering to sell your home for you so you can move in immediately – but for 10 percent of the proceeds.
Reputable operators are likely to be members of the Associated Retirement Community Operators (Arco) professional association. This should give you confidence in their integrity – but the sales teams are still there to sell and you may be at a vulnerable point when making the decision to buy a home. If you can, involve your family in the decision. The most important thing to remember is that this isn’t an investment, it’s a lifestyle choice. And for many, it’s a good choice.
My customers responded with open eyes. They understand the cost and their families do too. Most were very happy with their decision. So far, no one has searched or found a murder victim on the premises. Or at least none that they told me about.
Charles Calkin is Senior Financial Planner at wealth manager James Hambro & Partners