Update on how retirement complexes' event fees could affect community-led housing groups
An event fee is a charge made by a landlord on the occurrence of a specified event, for instance, if a tenant sells its lease.
Regular readers may remember that the Law Commission has been looking at event fees.
Why do retirement homes use event fees?
Retirement complexes often rely on a financial model which charges event fees when resident dies (or moves out) and sells their retirement home to an incoming tenant. This allows tenants to pay a reduced price when they move in so that they have more cash for themselves and for the retirement complex to recoup its costs when the tenant dies or moves on. There was concern in the government that this practice was open to abuse.
The background to the Law Commissions involvement with events fees
The Law Commission was not only asked to look at event fees charged in relation to retirement housing but was also asked to look at event fees in leasehold structures more generally. If a ban or limitations were set on event fees generally, this could have had an impact on community-led housing groups who sometimes recycle individual profit on units back into the group. An earlier article in relation to this is to be found here.
How could event fees affect community-led housing groups?
The good news is that the Law Commission has restricted its recommendations to retirement housing leases. The recommendations included introducing restrictions of when event fees can be charged, the provision of standard information to tenants and a cap on event fees. The government intends make these recommendations the law.
Once the appropriate legislation is in place, community-led housing groups will not have to comply with it. However, they would be well advised to do so as an example of best practice.
If you would like to discuss any aspect of this article further, please contact Emma Ridge or any other member of the Charities and Social Economy team on 0113 244 6100.
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The information in this article is necessarily of a general nature. Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors