Wealth
Which retirement village model suits you?
Most people buy into a retirement village for lifestyle, not investment. But, writes DON MACPHERSON, there are different ways of obtaining tenure.
We spend a lot of time assisting people into retirement villages. The main thing to understand is that buying into a retirement village is very different to buying and selling a house the way you have done all your life.
Each village has its own way of creating rights to reside in their properties.
There are four main ways that retirement villages offer tenure to an incoming resident:
Freehold
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. Usually they pay stamp duty.
Usually they get any capital gain. The title is registered in the Titles Office. This is the traditional ownership method.
Leasehold
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 – though 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 always.
Licence
Less common than leasehold (at least in Queensland), a licence creates a right to reside but is not registered against the title deed. However, there are additional protections under The Retirement Villages Act. Usually there is no capital gain. There is no stamp duty.
PREFAB/Relocatable Homes
This model involves owning the house, but not the land. One pays a site rental to have one’s house on the land owned by the operator. Because you own the home, there is usually capital gain available.
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 including exit fees or deferred management fees.
Retirement village contracts are always long and complex. Specialist advice should be sought before entering into a contract for any type of retirement village arrangement.
Don Macpherson is a family law specialist at Brisbane Elder Law. Call 1800 961 622 or visit brisbaneelderlaw.com.au
