McCarthy and Stone plc

Retirement housing company agrees to change its lease agreements

1/09    14 January 2009

The OFT has secured an agreement from a major builder of UK retirement apartments to amend its leases, especially in relation to the re-sale of properties.

McCarthy and Stone plc has agreed to remove from future contracts, and not enforce in existing contracts, a term in its leases that involved charging consumers a 'transfer' fee of one per cent of the sale price when the property was subsequently sold. The OFT considered this term was likely to be in breach of the Unfair Terms in Consumer Contracts Regulations 1999 (the UTCCRs). The company said that it did not agree with the OFT's view but co-operated with discussions and agreed to the changes. The company has also agreed to amend various other terms.

The OFT has raised the issue of 'transfer' fees with the proposed body that will be responsible for delivering a code of conduct and redress scheme in the homebuilding industry, which has agreed to consider the matter and facilitate discussions with the industry. This body is being formed in reponse to the OFT's Homebuilding market study.

Mike Haley OFT Director of Consumer Protection said:

'These changes will benefit thousands of elderly and potentially vulnerable residents selling their homes. We are pleased that the changes have been accepted and implemented without the need for further action by the OFT. Moving forward, we welcome the opportunity to work with the code body for the homebuilding industry as a means to improve lease agreements across the sector. '

NOTES

1. McCarthy & Stone plc retirement apartments are typically house-manager assisted retirement housing including communal areas.

2. For the financial year 2006/7 McCarthy & Stone plc properties had an average gross selling price of £190,700 and the average age of purchasers of standard developments was 77 (McCarthy & Stone Annual Results, 2007).

3. The UTCCRs apply to standard contract terms with consumers. The UTCCRs protect consumers against unfair standard terms in contracts they make with traders. The OFT, and certain other qualifying bodies (such as local authority trading standards, national regulatory bodies, and Which?) can take legal action to prevent the use of potentially unfair terms. A term is likely to be considered unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations under the contract, to the detriment of consumers. The UTCCRs say that a consumer is not bound by a standard term in a contract with a trader if that term is unfair. Ultimately, only a court can decide whether a term is unfair.

4. The leaflet Unfair Standard Terms (pdf 71 kb) provides general guidance for consumer advisers on the UTCCRs. See the Unfair Contract Terms Guidance section of this website which is a comprehensive guide to what the OFT believes to be fair and unfair terms in consumer contracts. The guidance is based on the OFT's experience of enforcing the UTCCRs, and is aimed at traders and their advisers as well as consumer advisers. OFT has also published the sector-specific Guidance on unfair terms in tenancy agreements (pdf 542 kb).