Case reference number: CRE-E/24897
Complainant: OFT own-initiative investigation
- Hart Retirement Developments (Southern) Limited (company
registration number 01000183 with a registered office of Oakleigh
House, High Street, Hartley Wintney, Hook, Hampshire RG27 8PE
Hart Retirement Developments (Thamesnorth) Limited (company
registration number 02600192, with a registered office of Oakleigh
House, High Street, Hartley Wintney, Hook, Hampshire RG27 8PE)
(both companies hereinafter collectively referred to as 'Hart').
The fairness of transfer fee terms enforced by Hart in leasehold
agreements with tenants of its retirement home properties.
- The Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs).
- Enterprise Act 2002.
As part of an industry wide investigation, the OFT investigated the use
of transfer fee terms by Hart in leasehold agreements with tenants of
its 14 retirement home developments in England and Wales. Hart does not
charge a ground rent at these properties.
The transfer fee term requires tenants to pay between 1.5 per cent and
five per cent (dependent on how long the property was owned) of the
higher of the sale price or open market value of their property in a
number of circumstances. The OFT considered that the transfer fee terms
were likely to be in breach of the UTCCRs.
Whilst Hart did not agree with the OFT's views and believed that its
transfer 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
Hart has undertaken that it will not include provision for the charging
of a transfer fee in any new retirement housing it constructs, unless
the fee is for a service and represents its reasonable costs.
Hart has also agreed, amongst other things, to make the following
changes to how it enforces transfer fee terms in the leases of its
existing retirement home properties:
- it has clarified that a transfer fee will not be payable upon the
tenant's interest first being passed on to a beneficiary under a will
or intestacy, when sub-letting, or in circumstances where there is
otherwise a change in occupation, an equity release or a surrender
- the transfer fee will continue to be charged on final sale. But for
existing tenants the transfer fee payable on sale 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
adjusted by the Retail Price Index. The fee was previously calculated
as a percentage of the higher of the sale price or open market value.
As a result, the amount of the transfer fee payable upon sale may in
some instances be less than would previously have been the case
existing tenants will also be given the option to switch to paying
a quarterly ground rent in place of the transfer fee if they want
greater certainty in planning their future financial liabilities. If
tenants choose to switch to paying a ground rent, they will need to
pay a lump sum at the time of switching equivalent to the notional
ground rent that they would have paid for the period between the
purchase of the property and their decision to switch
future tenants will be given the option at the outset to make a
fresh decision between paying a quarterly ground rent or a transfer
fee on final sale. If they choose the transfer fee option, the fee
payable will now be calculated on the sale price (and no longer on the
open market value if higher) avoiding disputes about what the property
was really worth.
Although not the focus of the OFT investigation, Hart has also agreed to
make some changes in relation to the small number of existing freehold
properties sited within its developments for which it is entitled to
receive a transfer fee from the owner:
Hart has undertaken that should it transfer its interest (or create a
subordinate leasehold interest) in any of its existing retirement home
properties that contain transfer fee terms, it will secure the agreement
of the purchaser to abide by the terms of the settlement.
The OFT has closed its investigation into Hart on the basis of the
undertakings given by the company.
Published 1 December 2012