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Is it time for a change in tenure in the retirement village sector?

  • United Kingdom
  • Real estate
  • Real estate sector


As we continue to battle with the ramifications of the COVID-19 pandemic, focus on the impact of a sustained period of isolation for the most vulnerable and alone has intensified. Many of these people would qualify to live within the retirement community and would benefit from the inclusion and safeguarding retirement villages offer. We take the opportunity in this article to consider whether there is any potential to simplify and offer flexibility for entry for these people into retirement village communities. These communities are currently governed by our traditional domestic landlord and tenant law and practice. We believe there is an opportunity to adopt alternative and more flexible retirement living models similar to those used elsewhere in the world.

The most prominent ownership model currently used in the sector is the purchase of a long leasehold interest in an apartment which is then capable of being re-sold on the open market.

This model allows residents to acquire an interest in land which is essentially typical of the residential housing market. However, retirement villages also offer residents the lifestyle choice of a serviced and secure environment as opposed to a simple residential investment.

Retirement villages are arranged very differently in other, more mature markets, such as those in Australia and New Zealand, and those markets may point the way to the future. In these jurisdictions, residents are offered a wider variety of tenure options, for example occupational licences and tenures more akin to freehold ownership. For example, “Strata Title”, which is widely used in Australian retirement villages, allows for individual ownership of certain parts of a property and shared ownership of others.. These different models do not take away from the benefits of a retirement village. In fact, they provide a potential resident with a very flexible occupational document which is straightforward to understand and implement. They also escape the main drawback of leasehold: they do not depreciate over time.

In addition, from an investor and operator perspective, these alternative tenures do not prevent the use of management charges and deferred management charges. These remain a key ingredient of the financial appraisal.

These alternative models could provide the UK with a unique and flexible offering to potential residents, both to drive the demand in the sector and help to provide a solution to the current housing crisis?

The Law Commission’s recent report on Commonhold appears to have pointed the way, but – disappointingly – it did not quite grasp the opportunity to propose an ownership model similar to Strata Title fit for the UK’s retirement village sector. Even so, the retirement village sector is now very well placed to lead the way in changing ownership models to expand access to the retirement living community and to create much needed new housing stock for the UK.