OFT issues notice to retirement home firms over fees

The OFT estimated that about 80 per cent of the retirement homes market is covered by the firms it has written to. The market currently stands at about 105,000 homes in the UK, it said.

Despite being unable to name the companies it had written to, the OFT stated on its website: "We have received a number of representations on these terms and are concerned that they may be unclear and not transparent to consumers. If they are not clear or transparent, in particular if consumers buying retirement homes do not take them into account at the outset, they may breach the Unfair Terms in Consumer Contract Regulations 1999."

Heather Clayton, senior director of consumer protection of the OFT, said the investigation was motivated by the need to ensure that terms and conditions of the consumer contacts were clear and fair.

She said: "We know there are concerns and will consider all responses and evidence from interested parties on these issues."

Peter Fisher, partner of Cotswolds-based Assent Financial Consultancy, said the exit fees were unjustified when they solely served the original builder of the property.

He said: "Exit fees protect the resale of the property so in reality I think they are unacceptable unless there is a clear value in being retained by the purchaser. Otherwise, they are protecting the original business of the builder rather than the homeowner. To my mind, they are unacceptable."

Martin Bamford, charted financial planner for Surrey-based IFA Informed Choice, said: "The OFT and other organisations are becoming a bit more proactive about spotting unfair contracts and taking enforcement action, and I think this falls within that category.

"It is okay to charge fees but in this case it seems like it was less than transparent at the outset. With fees, you should look to add value and get paid for what you do rather than penalise people. That’s the distinction between an unfair and fair fee."

In January, McCarthy and Stone, builders of retirement apartments in the UK, following an investigation by the OFT, voluntarily ceded an exit fee of 1 per cent on residents selling their homes. The OFT said the The 26 firms had 14 days to respond to the letter.