Later Living Lingo
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Boomer’s accommodation is booming. Investors are keen on Later Living as an area with incredible demand and limited supply. So, to ensure you are talking the right lingo, we thought we could help out with an alphabetical glossary of key terms.
Later Living, as a phrase and a distinct subsector of the residential property market, is the “catch all” term used for the assorted types of accommodation available to people in later life. But what is later life these days? It has arguably changed as older people have stayed fit, healthy and wealthy for longer - but the over 55s is where the planning and legislative system have defined the start or cusp of later life.
This stage of life could span 30 to 40 years and so the accommodation available is not a one size fits all. Here, we try to demystify some of the terms used in the sector so that you are talking the right Later Living lingo.
ARCO – Association of Retirement Community Operators
ARCO is the main body representing the UK retirement community sector. ARCO’s main objectives are to:
a) Promote confidence in the sector by ensuring that their members provide high quality service to residents.
ARCO operate a consumer code which members need to comply with for their sales and the operation of their retirement communities.
Born from 1946 to 1964, this is the generation born after the second world war who enjoyed the post war boom times, free love, rock and roll and affluence. Often used disparagingly by the youth of today to anyone over 30 and also includes the likes of Tom Cruise and Sandra Bullock.
The planning use class C2 is for use as a residential institution. A care home would be a C2 use. C2 use should not require an affordable housing contribution (note “should not” some Local Planning Authorities will still try!).
The planning use class C3 is for use as a residential dwelling. There is a lack of consistency across the UK’s local planning authorities as to how retirement living is designated and it will hinge on what is the element of care provided in the home. There are calls in the industry for a dedicated use class for older persons accommodation to clear up this ambiguity and unlock more schemes for approval that simply cannot be delivered if an affordable housing contribution is levied.
Care Quality Commission (CQC)
The Care Quality Commission (CQC) is a public body (sponsored by the Department of Health and Social Care) that regulates all health and social care services in England. The objective of the CQC is to ensure the quality and safety of the care provided in hospitals, dentists, ambulances and care homes, as well as the care provided in people’s own homes.
Deferred management fees (DMF)
The DMF, sometimes referred to as an exit or departure fee, is a one-off cost payable by a retirement village resident to the operator when the resident leaves/sells their home. The amount of the DMF is generally calculated as a percentage of the sale price multiplied by the number of years the resident lived in the property.
Whilst the DMF includes a profit margin for the operator, it also helps the resident offset the cost of retirement living by reducing the initial upfront cost. When a resident buys a retirement village property, the price is generally cheaper than if they bought a similar non-retirement property and this is because they have ‘deferred’ paying that difference until they leave.
The DMF helps to pay for the maintenance and development of public facilities in a retirement village including communal halls, gardens, swimming pools etc.
Equity release is a financial plan, offered by a number of companies, allowing older people to sell off part of their home and turn it into a lump sum of cash.
Event fees / exit fees
Event or Exit fees include but are not limited to exit fees, transfer fees, deferred management fees, contingency fees and selling service fees. Specialist accommodation in the later living sector is expensive to run and event fees/ exit fees have evolved in the industry as a way to cover the high running costs.
Retirement properties are almost always sold on a leasehold basis (rather than freehold) and many of the related leases require the owners to pay a fee on the occurrence of certain events – such as sale, sub-letting or change of occupancy of the property.
The Law Commission looked into the use of event fees in the industry and recommended a code of practice. This has not yet been implemented but the focus on event fees in the press has no doubt led to some self-regulation by developers and operators.
Extra care / assisted living
Assisted living (also known as extra-care housing) offers more support than sheltered housing but still allows residents to live independently.
Residents live in self-contained flats and staff are usually available up to 24 hours per day to provide personal care and support services. The services are tailored to the resident and can include help with washing, dressing, using the bathroom and taking medication. Domestic help such as shopping, laundry, and meals may also be provided.
Care homes and retirement villages are often funded by using the forward funded method. This means that a developer will acquire the land, get the requisite planning use for the development, in some circumstances secure an operator and then sell the property on which the development is intended to be built, as a bare land sale to a funder (usually a real estate investment fund/pension fund). This has SDLT benefits. Separately the developer will be obliged to deliver the completed development for the funder in return for funding and the potential for a future profit payment. In circumstances where there is a lease to an operator involved the funder will have the benefit of long income indexed linked rents.
An expression used to epitomise the disposable income the older generation have to spend.
Ground rent is traditionally an annual fee paid by a leasehold property owner to the freeholder in exchange for the leaseholder renting the land that their property sits on.
Earlier this year the UK government announced a number of leasehold sector reforms, including a pledge to abolish ground rent charges on new retirement homes which was a surprise for the sector after the UK Government had appeared to confirm it understood that there would be a case for the later living sector to be excluded from the reforms on the basis that the supply of new retirement housing would be negatively impacted at a time where there is a chronic shortage of accommodation.
Housing with care
Housing with care consists of self-contained units or apartments with on-site amenities and communal facilities and includes an on-site care provision (generally with 24-hour staffing). Housing with care is intended to help facilitate an active and independent lifestyle.
Housing with Care is distinct from the traditional care home/sheltered housing model which would include a warden and a communal lounge area etc.
Housing with support
Housing with support is the more basic form of retirement housing and generally consists of private units with some communal facilities and limited levels of on-site support for residents.
Income strip lease
This relates to circumstances where there is a long-ish lease in place (30-50 years) to a good covenant (and often the Landlord is a fund – see Forward funding above). The lease will contain an option to purchase the freehold of the later living property for the tenant at the end of the lease for minimal consideration (£1). The cost of the development is amortised over the term of the lease and there is secure long income for the Landlord. The option to purchase benefitting the tenant can be seen as an extra incentivise for lease compliance so as not to lose the option to acquire the freehold reversion.
Luxury retirement living
If you have read Richard Osman’s Thursday Murder Club you will know what we are talking about here. Think high end, 5* accommodation with all the mod cons and facilities you could dream of. Cinema, Restaurants, Gym, Spa and dedicated Chauffeurs to drive you around. Unsurprisingly, these do not come cheap!
Mobile home park
A mobile home park (or residential home park) is an area of land owned by a Park operator. Concrete bases with capped off services known as pitches or plots are occupied by owners of mobile homes who pay an annual pitch fee to the Park operator. Once the owner of a mobile home sites their mobile home on a pitch, occupation is governed by, inter alia, the Mobile Homes Act 1983 but many Park operators issue formal written statements setting out express terms for occupation. Occupation is often restricted to the over 50s although the age demographic on most parks is over 75. The Park must have a Site Licence which is issued by the local authority and has a number of conditions to control the use of the Park, for example: number of and spacing between mobile homes, measures required for the prevention and detection of fire, facilities required for sanitation and refuse disposal. The Parks often have the feeling of a small village community with well-maintained gardens and a park warden.
A new concept in inter-generational living, bringing young and old together to form a local community. The new concept is designed to offer the potential for young people and the older generation to spend time in each other’s company on a regular basis which is thought to have many mental and physical health-related benefits helping the elderly remain more mentally and physically alert.
A nursing home provides residential accommodation as well as healthcare for people who are unable to receive sufficient care at home and do not need to go into hospital. A nursing home may specialise in caring for certain conditions such as dementia, learning disabilities or physical disabilities. All residents require some element of nursing care and care is provided 24-hours a day by registered nurses who are supported by care assistants.
Opco propcos structures
If you are investing into a later living development, you may see intra group company lease structures with a property company owning the land and an operating company delivering the services to the care home or retirement living development.
This expression is used in the context of Care Homes and distinguishes between a resident who pays for their own care privately (rather than via local authority funding).
Residential care homes
These provide accommodation, meals and assistance with personal care for people requiring short- or long-term care. They do not always provide nursing or other medical staff, so if a resident has more complex medical requirements, they are likely to need a nursing home.
Retirement living usually describes bungalow or apartment developments built especially for older people to allow them to live independently and safely. The majority of properties in retirement villages are designed for independent living, but some offer access to care and support for those that need it. This is the classic McCarthy Stone type development.
Unlike in a care home, residents usually buy, part-buy or rent an apartment on the development.
Retirement Villages tend to be a larger scheme of Retirement Living apartments. With a focus on social wellbeing they will encompass a number of communal facilities, restaurants, gyms and on-site healthcare facilities. These are mainly independent living units with a menu of domiciliary care available to suit individual needs.
Often there is a care home nearby or onsite to facilitate a move by one half of a couple with differing/enhanced care needs.
Older Person Shared Ownership (OPSO) schemes are generally available for those aged 55 or over and enable the buyers to part buy or part rent a purpose-built home.
OPSO schemes work in a similar way to traditional shared ownership in that the purchaser buys a share in a property (usually between 25% to 75%) funded by a mortgage and/or savings and then pays a subsidised rent to a housing association on the remaining share.
With shared ownership the monthly property costs are often much lower than a full mortgage or privately renting a home.
Another generic name for the sector.
Sheltered housing consists of self-contained flats or bungalows (generally with one or two bedrooms) which residents can buy or rent. This form of housing suits residents who want to live in smaller and easier-to-manage homes and/or residents who want to live independently but need some support.
Sheltered housing often includes a scheme manager/warden or support staff, 24-hour emergency help through an alarm system, communal arears such as gardens or lounges and social activities for residents.
A transfer fee is an event fee payable by the property owner (leaseholder) to the landlord or management organisation in certain circumstances. These fees are known by various names, including ‘transfer’, ‘event’, ‘exit’ or ‘departure’ fees and are most commonly triggered when a property is sold or sublet, but may also be payable where there is a change of occupancy e.g. if an owner’s partner, relative or carer moves into the property.
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