Rodney Whyte

There are almost 12 million people aged 65 and above in the UK, and that demographic is forecast to grow by an additional 8.6 million people over the next 50 years, according to Age UK.

Of those 12 million, the fastest growing age group is 85+, which is expected to double to 3.2 million by 2041 and to treble by 2066 to 5.1 million, or seven per cent of the UK population.

Such a dramatic rise in our elderly population has generated interest from investors and developers in what is known as “later living communities” which offer not only high quality residential accommodation, but can include a whole range of ancillary services such as restaurants, gyms, swimming pools, consultant rooms, on-site GP surgeries, retail space and traditional care home facilities reflecting several levels of care support.

These communities may offer a potential solution for many older people who want to downsize from the family home as they reach their later years although not necessarily in the context of being retired. It is suggested later living communities may also help address the “silent epidemic” – loneliness – making residents feel less isolated and providing the means to live independently in one community for years to come, with the benefit of flexible and supportive care available on their doorstep.

Legal & General are one of the latest investors to commit to later living projects with the launch of Guild Living, which aims to deliver 3000 new homes over the next five years, equating to a gross development value of around £2 billion. Guild Living’s first two sites will be in Bath and Epsom – but as it stands there is little likelihood that this type of initiative will be rolled out any time soon to towns like Banchory or Ellon –primarily because the legal structure operating in England to support such a development does not work in Scotland.

In England, a developer of later life residential units and care facilities would typically enter in to long lease with individual owners/residents. After payment of an initial premium, the lease would run until the property was sold or a “lifetime event” occurred, such as the owner passing away or permanently moving to facilities more suited to the level of care required, and which on each lifetime event a further charge known as an “event fee” would be payable based on a percentage of the market value of the unit. This arrangement supports the significant up front investment in the communal facilities and provides a steady income return over many years, with the product an asset which could be sold on to a third party investor if the original developer was minded to do so.

While this works well in England, in Scotland the legal system does not allow developers to enter in to long lease agreements. There is a potential work-around involving the use of standard securities, but under current legislation the provision in certain circumstances for an automatic right of discharge of the standard security (the right of redemption), could disrupt the certainty of long term event fees and therefore diluting the attractiveness of making the initial project investment.

Not surprisingly, this situation is viewed as a deal breaker by potential investors and developers, who would otherwise be interested in committing substantial funds to progressing later living projects in Scotland.

The Scottish Law Commission recently published a discussion paper seeking views on the reform of securities granted over land and building in Scotland (the last major review was in 1970). Under consideration will be the creation, variation, transfer and discharge of standard securities and which types of obligation can be secured. Let’s hope the review will consider ways in which changes in the law can encourage, rather than inhibit, the development of later living accommodation.

Most of us working in the property sector would agree with lead commissioner, Dr Andrew Steven, who said: “Too much of the law is old or unduly complex, leading to uncertainty. This discussion paper is an important step towards ensuring that the law is fit for the needs of today’s Scotland.”

There is a widely held view that by encouraging fluidity at the top of the property ladder, and empowering residents to downsize from larger homes, this will energise the entire property chain all the way down to first time buyers. This trickle-down effect could go some way to relieving the pressure on Scotland’s housing market.

• Rodney Whyte is a partner and specialist in residential land development at Pinsent Masons.