**Why are families forced out as equity release firms make a killing ?
After her mother died, a daughter was given just one month to pack up and leave the family home.**
When June died at the age of 98 a few weeks ago, it was a painful time for her bereaved daughter, Rosemary. She had moved in eight years earlier to care for her mother, and now had to arrange the funeral, as well as sort out all the paperwork such as the will and death certificates.
What she didn’t reckon on was a repossession demand from an equity release company to clear the house of everything and get out within four weeks. Much is written about the rise of equity release – sales are booming – but very little about what happens on death.
Anyone who has moved from their family home knows that a month is barely enough to arrange the removal people, pack everything, contact all the utility companies and so on. The idea of having to do that in the days after a death, with the funeral quite rightly the top priority, beggars belief. Then add into the mix that Rosemary is herself now in her mid-60s, and suffers from chronic fatigue syndrome.
But there was a lot of money in it for the equity release company. June and her now deceased husband had entered into an equity release contract in 1994, after they had fallen on tough financial times.
Though their home in an upmarket part of north London was, even then, worth a fair bit, the equity release company gave them about £52,000 for a 90% share. When it is sold, it is likely to fetch not far short of £1m, so you can see why the equity release company is so keen to get Rosemary out.
When I was first contacted by Rosemary, I thought it might be a mistake as, while the company had the right to repossess, four weeks is evidently unreasonable. So I called the big providers, Aviva and Legal & General. They said their typical terms are up to one year. They appeared to be as surprised as Rosemary about the four-week deadline to get out.
But June had a different type of equity release scheme, and not with Aviva or L&G. There are two types; so-called “lifetime mortgages” where you take out a loan, but don’t pay any interest on it. Instead, the interest rolls up and on death the original capital and rolled-up interest is repaid from the house sale.
The other type is “home reversion”. This is where a company gives you a lump sum for a share in your home (usually 90% to 100%) and, again, you pay nothing until you die, but it then takes that portion of the home.
Sadly, Rosemary won’t permit me to name the company involved, as she fears they will withhold the 10% share she is owed (it’s pitiable how Britons are now so cowed by corporate behaviour).
But when I contacted a home reversion plan company, it confirmed that four weeks is standard. It told me: “The deed requires the additional occupier to vacate the property within one month of any trigger event under the lifetime lease and we must (and do) stand by this contractual agreement.”
After kicking up a fuss, the company behind Rosemary’s repossession has agreed to give her another two months to get out.
There will be those people who argue that Rosemary’s parents entered into a contract, knew what they were doing, and got the cash. I have some sympathy with that. But just one month to get out? Get lost.