OFT investigates retirement home exit fees

107/09 3 September 2009

The OFT is issuing formal written notices to 26 retirement home firms setting out concerns over fees charged when residents sell or rent their properties.

See Retirement Homes Investigation into exit fees page.
See Q&As.

The OFT is concerned in particular about the fairness and clarity of contract terms providing for these so-called 'exit fees', charged to occupants of purpose built retirement homes which may breach the Unfair Terms in Consumer Contracts Regulations.

The firms are being given 14 days to respond. The OFT is also seeking information and views about the terms from residents, consumer groups and other interested parties. Once all parties have provided their input the OFT will decide how to proceed.

The investigation follows voluntary undertakings secured from a major builder of UK retirement apartments, McCarthy and Stone, to remove an exit fee charging consumers one per cent of the sale price when a property is sold.

Heather Clayton, OFT Senior Director of Consumer Protection, said:

'This investigation is motivated by the need to ensure that terms and conditions are clear and fair, particularly in this sector where customers are potentially vulnerable. We know there are concerns and will consider all responses and evidence from interested parties on these issues.'

NOTES

1. Those who wish to send information on exit fees should write to:

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 by 22 January 2010.

2. The OFT has not disclosed the names of the companies which are the subject of the notices referred to above. Under restrictions in the Enterprise Act 2002 relating to disclosure of specified information, it is a criminal offence for a public authority such as the OFT to disclose certain specified information relating to a business or an individual which it obtains in connection with the exercise of its functions. The OFT is under a legal requirement to consider the extent to which any such disclosure is necessary and the potential harm it may cause to any business or individual to which it relates.

3. The Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs) protect consumers against terms in contracts they make with traders. The OFT, together with certain other bodies can take enforcement action to prevent the use of these terms.

4. If having considered the responses of the companies to the OFTs letters the OFT forms the view that the exit fee terms they use are not unfair then no further action will be taken. However, if the OFT forms the view that the terms are unfair then under the Enterprise Act 2002, the OFT may apply for an enforcement order against or seek undertakings from the companies to stop or prevent the continued use of such terms.

5. The OFT is unable to provide advice or resolve individual complaints for consumers. Consumers who are concerned they have been unfairly treated or want advice on their personal circumstances can contact Consumer Direct (tel: 08454 04 05 06 or visit the Consumer Direct website or obtain independent legal advice).

6. In January the OFT secured an agreement from McCarthy and Stone plc to amend its leases, especially in relation to the re-sale of properties. See press release 01/09.

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