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05 Nov 2020

Senior Living FAQs: Outsourcing management

We first need to identify what type of senior living accommodation you are developing at the site.

This will have an impact on who might be able to manage the senior living accommodation:

  • Age-restricted general market housing – Requires the structural and external parts of the building, and internal common parts to be kept well maintained.
  • Retirement Living or Sheltered Housing – Requires the following:
    • the structural and external parts of the building, and internal common parts to be kept well maintained; and
    • a warden / house manager or a 24 hour alarm for residents.
  • Extra care housing or housing-with-care – Requires the following:
    • the structural and external parts of the building, and internal common parts to be kept well maintained;
    • a warden / house manager or a 24 hour alarm for residents;
    • restaurant/bar services;
    • extensive cleaning services for communal rooms;
    • a team of support staff; and
    • CQC regulated care services.

Whilst it may be appropriate to appoint a managing agent to run age-restricted general market housing as there is little distinction to be drawn between that sort of accommodation and a block of flats, that is clearly not going to be appropriate for housing-with-care.

You may decide that you can outsource each individual element of sheltered housing / housing-with-care. However, this will require you to deal with the procurement of the relevant service contracts and ensure that the service providers perform in line with your expectations for the duration of the contract. Some specialist sheltered housing / housing-with-care providers may be prepared to procure the other contracts (i.e. with catering providers) and as such, in return for a higher fee, you will only be required to procure one service contract. Whilst, you will have less control over their services and less ability to negotiate a lower service fee from the sub-contractors, this will require less active management by you.

The alternative may be to let the site to a specialist sheltered housing / housing-with-care provider (typically for 20 years or more) who takes responsibility for either running or outsourcing each of the services. They would pay an annual rent, which would offer a fixed return to investors. Whilst your returns when the accommodation is fully occupied might not be as a high as they would be if you were procuring each of the service contracts yourself, you would be shielded from rental voids if the accommodation is not fully occupied.