The OFT is concerned about the use of exit fee terms in leasehold agreements which may cause harm to consumers in the retirement home sector.
2. What 'exit fee' is the OFT currently investigating?The exit fee, often called a 'transfer fee', that the OFT is looking at is the fee a leaseholder is required to pay by his freeholder when he sells or rents his leasehold property or disposes of it in some other way. Some firms have said that the fee covers the expense they incur in carrying out the administration work involved in processing the assignment of the lease. This is different from a 'contingency fee' which is usually payable into a fund that has been set aside for future maintenance. The OFT is not currently looking at the contingency fee.
3. Why do you consider these terms may be unfair?We have received a number of representations on these terms. As a result, we believe that one of the reasons they may be unfair is that they may be unclear and not transparent to consumers. If they are not clear or transparent, in particular if consumers buying retirement homes do not take them into account at the outset, they may breach the Unfair Terms in Consumer Contract Regulations 1999. It is important to note, however, that we are investigating the matter and we will be asking firms and consumer groups to respond with their views.
4. I/A member of my family own, or recently sold, a retirement home - what action should I take?The OFT is unable to provide advice or resolve individual complaints for consumers. If on conclusion of the investigation the OFT finds that the exit fee terms are unfair it may apply for an enforcement order or undertakings under the Enterprise Act 2002 to stop or prevent continued use of the term. In the meantime if you or a member of your family are concerned they have been unfairly treated or want advice on their or your personal circumstances, contact Consumer Direct (tel: 08454 04 05 06 or visit the Consumer Direct Website or obtain independent legal advice.
5. Will the OFT help me with my complaint about an exit fee term?The OFT is unable to provide advice or resolve individual complaints for consumers. If you or a member of your family are concerned that you may have been unfairly treated or want advice on their personal circumstances contact Consumer Direct (tel: 08454 04 05 06 or visit the Consumer Direct Website or obtain independent legal advice.
6. Why are you making some of the details of the investigation public?The OFT is making some of the details of this investigation known because of the number of representations it has received on this issue.
7. Why won't you name the companies now?The OFT will not disclose the names of the companies it is in the process of writing to about the exit fee terms. To do so may pre-empt the result of the OFT's investigation into this matter and the result of its consultation on greater transparency.
Download the Transparency consultation (pdf 499 kb).
Also, the OFT has not disclosed the names of the companies which are the subject of the notices referred to in the press release, because it is restricted from doing so under the Enterprise Act 2002.
Then the OFT will have to consider what steps to take next, which would include the option of taking, some or all of, the firms that refused to sign to court to seek a court order under the Enterprise Act to stop breaches of the Unfair Terms in Consumer Contract Regulations (UTCCRs).
9. Why are you giving them the opportunity to sign undertakings, if they are breaking the law why don't you just prosecute them?Under the Enterprise Act 2002, under which the OFT is taking the investigation, the OFT must consult with the firms being investigated with a view to getting the infringement of the law stopped and/or preventing future infringement. As part of that process the OFT is allowed to accept undertakings in lieu of court action. This allows a speedier cessation of the problem.
10. Are these undertakings legally binding? If the firms break the undertakings, can they be prosecuted then?If the undertakings are breached then the OFT can apply for a court order to enforce them. If a court order is disobeyed it would likely result in contempt of court proceedings which can result in a fine or imprisonment.
11. What do you mean by 'retirement homes'?We mean 'purpose built, owner occupied, leasehold properties' in the retirement homes sector.
12. How big is the market?There are approximately 105,000 private retirement properties.
13. What percentage of the market is covered by the companies the OFT is writing to?Over 80 per cent of the retirement homes market.
14. Has the OFT looked at this area previously?The OFT conducted an earlier investigation into an exit fee term used by McCarthy and Stone which resulted in that firm voluntarily providing the OFT with undertakings that it would no longer use the term. See press release 01/09.
15. What powers does the OFT have to undertake this investigation?Section 5 of the Enterprise Act 2002 allows the OFT to obtain, compile and keep under review information about matters relating to the carrying out of its functions. In this case the function is the investigation of a term which may be unfair with a view to taking enforcement or other action. The OFT also has powers under Part 8 of the Enterprise Act 2002 to seek information with a view to obtaining undertakings from firms or enforcement orders against firms.
16. How can I contact the team?We continue to be in contact with key stakeholders and review any userful information that they provide.
You can also contact us at:
Retirement Homes Exit Fees Investigation
Floor 6C
Office of Fair Trading
Fleetbank House
2-6 Salisbury Square
London EC4Y 8JX
or email: retirementhomes@oft.gsi.gov.uk
17. What is the time frame for the investigation?Given the number of players in the retirement home market and the number of which the OFT approached about their use of transfer fees, it is difficult to place a time frame on the investigation. The OFT will continue to update this page as the investigation continues. Should the OFT take this matter to court it is unlikely it will be settled before at least Autumn 2010.
18. Should I withhold payment of this fee until the OFT's investigation has been completed?The OFT is unable to provide advice or resolve individual complaints for consumers. This includes advising on whether or not fees payable under such terms should be paid during or after this investigation or whether consumers who have already paid such fees have a case for claiming them back. Consumers should seek their own independent legal advice.
19. Will any decision by the OFT that the terms are unfair apply where the fee has already been paid?A decision by the OFT that the terms are unfair may have implications for those consumers where fees have already been paid under contracts that contained a transfer fee term. However, consumers who want to seek redress prior to, or subsequent to, completion of the OFT's investigation, and the decision that follows, should seek their own independent legal advice.
20. Should I hold off taking court action until the OFT investigation is completed?Consumers have their own rights under the Unfair Terms in Consumer Contracts Regulations 1999 that are separate to and not dependent on the OFT or other enforcement authority and therefore can take the issue to court at anytime. However, we would strongly advise that consumers seek independent legal advice before considering any legal action.
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