You don’t want to be known as “that nice little old lady that lives on level 11 who we never talked to” or worse, “they found that nice little old lady on level 11 after a week”.
People do – and should – buy for lifestyle rather than investment. It’s a choice for companionship, community involvement, and security.
Covid has caused people to re-think their lives, and to see others enjoying the wellbeing that comes with the community living that a retirement village offers.
However, as with any significant transaction, buyer be aware!
People buying into a retirement village need to understand the transaction is very different to buying and selling a house in the way they have been used to doing throughout their lives.
Different retirement villages provide different ways of creating rights to reside in their properties.
There are four main ways that retirement village offer tenure to an incoming resident:
This is the most common way that retirement villages offer their properties to incoming residents. The lease contract creates a right to reside for an extended period (usually 99 years – and we are yet to see someone outlive their lease). A lease is registered in the Titles Office. There is no stamp duty. Sometimes there is capital gain, but not usually.
Less common, at least in Queensland, a licence creates a right to reside but is not registered against the Title Deed. However, there are additional protections provided under the Retirement Villages Act. Usually there is no capital gain. There is no stamp duty.
- Manufactured/Relocatable Homes
This model involves owning the house, but not the land. The owner pays a site rental to have a house on the land owned by the operator. Because you own the home there is usually a modest capital gain possible. There is no stamp duty.
This is the way that people are used to owning property. They buy the property (like buying a house) and can sell it at the end. They pay stamp duty. They get any capital gain or bear any loss. The title is registered in the Titles Office. This is the traditional ownership method.
It is more like buying a unit in an apartment building and is subject to a body corporate structure. It is however rare in the retirement village industry.
Whatever the ownership model, all retirement village contracts provide extensive rules in relation to occupation of the home in which you live. There are always ongoing fees while in the village.
There are usually significant fees payable at the end of the ownership period – called various names such as exit fees, or deferred management fees. Exit fee percentages vary across the industry, and can be based on the incoming payment, or the resale figure.
Other exit payments, such as renovation costs, reinstatement costs, costs of sale, legal costs, and valuation fees vary from contract to contract, and operator to operator. Some allow for capital gain (and loss), some do not.
Retirement village contracts are always long and complex, often running to more than 100 pages. Specialist advice should be sought before entering into a contract for any type of retirement village arrangement.
Don MacPherson is an expert in retirement village contracts at Sunshine Coast Elder Law. Call1800 961 622 or visit sunshinecoastelderlaw.com.au or Brisbane Elder Law. Call1800 961 622 or visit brisbaneelderlaw.com.au