McCarthy & Stone pleased with likely exemption from ground rent ban

Retirement housebuilder McCarthy & Stone welcomed the response of the Ministry of Housing, Communities and Local Government (MHCLG) to its October consultation on ground rents on Friday.

The FTSE 250 company said the MHCLG had confirmed that the retirement community sector would be given an exemption, and be permitted to charge an economic ground rent after they are reduced to nil elsewhere.

It said the ministry had continued to recognise the “unique way” the retirement sector used ground rents to recover much of the construction costs of the “significant” shared areas that were integral to retirement living, and which delivered direct benefit to customers.

“Retirement communities make a real difference to the lives of our customers by bringing older people together, addressing loneliness and improving their overall wellbeing,” said McCarthy & Stone chief executive officer John Tonkiss.

“The shared areas in our developments are the key to providing these benefits, and include communal lounges, restaurants and well-being suites.

“However, these spaces cost between £1m and £2m per development to build.”

As a result, Tonkiss said the firm required an additional funding stream to cover that cost, and ensure the apartments remained affordable for customers.

“We therefore fully support today's announcement from the Government to exempt ground rents in retirement communities as it ensures these shared areas remain viable to provide.

“It also means the customer is in full control of how they pay for these costs, by choosing to pay either an economic ground rent or a higher purchase price.

“This option is aligned to our new strategy of providing greater customer choice.”

McCarthy & Stone said it would continue to discuss the details of the exemption with government officials in the coming months.

It said the announcement would have no impact on the current financial year, and reduced the need to take mitigating action in future years.