OFT investigates excessive retirement home fees

Thursday, 03 September 2009 02:45

The Office of Fair Trading (OFT) has sent written notices to 26 retirement firm homes to investigate fees charged when residents sell or rent properties.

According to the OFT, the firms, which own about 80 per cent of the care homes in the market, may be in violation of the Unfair Terms in Consumer Contract Regulations (UTCCR) of 1999.

Concerns regarding the transparency of homes' contractual requirements came to light after a number of representatives complained to the OFT.

Many pensioners, already in an often vulnerable position, were allegedly unaware of the high fees associated with selling until they were faced with paying them.

The UTCCR states companies must act on "good faith"- meaning they must communicate fairly and openly with consumers. Standard terms must be in plain and intelligible language.

"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," said OFT senior director of consumer protection, Heather Clayton.

The problem of ambiguity surrounding care home living agreements has been in the OFT's sights for some time.

In 2005, the watchdog released research showing many retired people in homes weren't even sure if a written contract for their property existed.

If the OFT is successful in blocking retirement home firms' ability to charge excessive fees it will be their second time to do so in the past year.

In January, the OFT scored a victory over retirement apartment builder, McCarthy & Stone. The government watchdog eliminated a one per cent exit fee of the sale price when the property is sold.

The builder initially justified the expense by explaining the fee was in place to offset service charges.

The firms notified this week have 14 days to respond to enquiries, at which point the OFT will decide whether to initiate legal proceedings.

"We know there are concerns and will consider all responses and evidence from interested parties on these issues," concluded Ms Clayton.

Customers who feel they have been a victim of unfair practices are encouraged by the OFT to complain via the Consumer Direct website.

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