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Lifecare decision merits careful consideration

  • United Kingdom
  • Real estate
  • Real estate planning

04-07-2019

A Planning Inspector has decided that ‘event fees’ should be taken into account in assessing the viability of retirement living developments and their ability to contribute to planning gain. Usually due on the death of a resident, the Inspector concluded that these fees would ‘soon reach a ‘steady state’ when the average number of disposals each year will be relatively constant and a relatively reliable income stream forecast’ and ‘a pattern of financial gains over the medium to long term’. He also concluded that the premium for these units was being suppressed by the requirement to pay an event fee, which was also suppressing the outcome of viability assessments. 

Key points

  • It was recognised that the market for retirement communities was relatively immature with a lack of evidence as to how event fees should be valued for viability, but the Inspector determined that they should nonetheless be taken into account now
  • There are inevitable difficulties in attributing a capitalised value to event fees, as the occupancy period for each accommodation unit will be uncertain particularly where dependents may remain in occupation
  • The costs of securing funding against future potential revenues can, however, be taken into account in viability assessments.
  • As the market becomes more established ‘average values’ may emerge for schemes with particular characteristics, but pending this the determination of applications involving viability assessments is uncertain.

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