A crackdown on shock fees charged to older people who have moved into retirement leasehold properties should be introduced, the Law Commission has urged.
The Commission said a two-year study into the situation in England and Wales found owners are not always being told about charges which can be up to 30% of the property price.
It said those who have moved into retirement leasehold properties “could be being hit with unfair fees worth thousands of pounds”.
The Commission said its research, which involved assessing existing laws, meeting with charities, campaign groups and landlords and a public consultation, found there is “real potential for abuse” in the charging of event fees, which can have a variety of other names such as transfer fees, exit fees and contingency fees.
It said the system works well most of the time – but a few rogue landlords may hide complicated charging formulas deep in the small print or charge older people fees in unexpected situations.
It said leases can include a fee triggered by certain events, such as when the owner sells or sub-lets their property – but owners and their families are sometimes not told about the fees until after they have agreed to buy the property.
The fees can be charged when the owner is not expecting it, such as when a spouse moves into a property, or when the owner moves into a nursing home and sub-lets the property.
The Commission had heard from consumers who have been left “angry and frustrated” by their experience with event fees, it said.
But it also heard that event fees can enable older people to live in a retirement property with facilities which they would not otherwise have been able to afford, by deferring the costs until they come to sell up.
The Commission, which was asked by the Department for Communities and Local Government (DCLG) to consider how to make event fees fairer, is recommending changes to the law to bring in a new code of practice, outlining minimum standards for landlords.
The recommendations would mean fees could only be charged in limited circumstances to prevent them arising unexpectedly.
They would only be charged when a property is sold, or in restricted circumstances when the property is sub-let or when the resident has died or the property is no longer their main home.
There should also be protections so that if a resident’s partner or carer moved into the property as their main home an event fee could not be charged on that change of occupancy, the Commission said.
It also wants to see standardised, transparent information given up-front at an early stage in the purchase process. This would include how much the fee is likely to be, an explanation of how the fee is calculated, who receives the fee and what the home owner will receive in exchange.
It said there should also be guidance and an online database for estate agents and consumers to ensure that event fee information is included in all adverts.
Law Commissioner Stephen Lewis said: “For many, event fees are a good way to enable the purchase of a quality retirement property now, by deferring payment of some of the running costs until they come to sell their home later.
“But, in the worst cases, a few unscrupulous landlords are getting away with very high hidden fees buried deep in the small print of a long and complicated lease.
“We’d urge the Government to crack down on rogue landlords by regulating the sector and making sure that before consumers sign on the dotted line, they have already been told exactly what’s being provided for their money.”
The Law Commission was set up by Parliament in 1965 to keep the laws of England and Wales under review, and to recommend reforms where needed.
A DCLG spokeswoman said: “It’s vital that the fees older people pay for retirement properties are fair, reasonable and easily understandable.
“We welcome the Law Commission’s wide-ranging review and we will consider the report’s recommendations closely.”