Case reference number: CRE-E/24874
Complainant: OFT own-initiative investigation
Investigation into: Fairhold Homes Limited (company registration
number 02556027; with a registered office of Molteno House, 302 Regents
Park Road, Finchley, London, N3 2JX) and associated Fairhold group
companies (collectively referred to as Fairhold)
The fairness of transfer fee terms enforced by Fairhold in leasehold
agreements with tenants of its retirement home properties.
- Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs)
- Consumer Protection from Unfair Trading Regulations 2008
- Enterprise Act 2002.
As part of an industry wide investigation, the OFT investigated the use
of transfer fee terms by Fairhold in leasehold agreements with tenants
of retirement homes held by Fairhold as freeholder. The transfer fee
terms require tenants to pay one per cent of the higher of the sale
price or open market value of their property in a number of
circumstances, and represent an income stream to that landlord. The OFT
considered that the transfer fee terms were likely to be in breach of
Although not the focus of the OFT investigation, the OFT also had
concerns about the fairness of contingency fund fee terms that were
generally drafted in a similar form to transfer fee terms. Contingency
fund fees are paid into a fund to pay for the repair and maintenance of
Whilst Fairhold did not agree with the OFT's views and believed that
its transfer fee and contingency fund fee terms did not breach the
UTCCRs, it engaged constructively with the OFT during the investigation
and agreed to sign undertakings to address the OFT's concerns, which
the OFT accepted. Undertakings were voluntarily given, without any
admission of any breach of the law, by Fairhold.
Fairhold has undertaken that it will not charge a transfer fee in any
new leases it obtains through the acquisition or development of
properties, unless the fee is for a service and represents its
The company has also agreed, amongst other things, to make the following
changes to how it enforces transfer fee terms in the leases of its
53,000 existing retirement home properties:
- It has clarified that leaseholders will not pay any transfer fee when
the lease is passed on through inheritance or surrendered, or when a
relative or carer moves in with them.
- A flat fee of £85 - to be adjusted in future years in line with
inflation - will be charged for sub-letting (by assured shorthold
tenancy agreement), replacing the current transfer fee of one per cent
of the open market value.
- A transfer fee of one per cent will continue to be charged on sale,
but it will now be calculated against the lower of either the price
the tenant sold the property at, or the price the tenant originally
paid for the property. This will give tenants certainty over their
maximum liability at the time they purchase the retirement home, and
also prevent disputes about what the right level of fee should be. The
fee was previously calculated as a percentage of the higher of the
sale price or open market value, which could lead to disputes about
what the property was really worth.
- The transparency of the transfer fee term will be improved in pre-sale
documentation, where the landlord is made aware that a sale is taking
Fairhold has also agreed that where the terms of an existing lease give
it discretion to waive the contingency fund fee of one per cent of the
open market value payable upon each sub-letting, it will instead charge
a fee equivalent to one month's rent (in accordance with the waiver)
for each sub-let by way of an assured shorthold tenancy agreement.
Further, Fairhold has agreed that it will not tell tenants that payment
of the transfer fee is for a service, or a requirement of the landlord
giving consent to sell or otherwise deal with the leasehold property.
Fees for services or consent are known as Administration Fees, and are
regulated under the Commonhold and Leasehold Reform Act 2002. As such
they must be reasonable and may be challenged in the Leasehold Valuation
Scope of the undertakings
The undertakings apply to Fairhold's 53,000 existing retirement home
leases (that is, leasehold retirement properties containing transfer fee
terms in which Fairhold owned the freehold as at 30 July 2012, the date
of the undertakings).
Fairhold has undertaken that should it assign the freehold (or create a
subordinate leasehold interest) in any of its existing leasehold
retirement home properties that contain transfer fee terms, it will
secure the agreement of the purchaser to abide by the terms of the
The OFT has closed its investigation into Fairhold on the basis of the
undertakings given by the company.