When looking into buying an independent living unit in a retirement village, there are lots of things to consider – cost, choosing the contract that most suits the buyer’s situation and the tenancy.
Here are the following types of tenancy, which the buyer will be confronted with:
- Leasehold arrangement
This is when the village operator owns the unit and a resident signs a lease. Leases in retirement villages are commonly for 99 years or more. These leases will be registered on the title deed held by Land Registry Services.
What are the costs associated?
The buyer will pay an “entry payment” (e.g.: an ingoing contribution or interest-free loan).
At some villages, the buyer can enter into a village contract and pay the ingoing contribution or purchase price at a later date once their home is sold. In this instance, you might be asked to pay a deposit.
There will be legal and conveyancing costs as with any property purchase.
The operator must register your lease with Land Registry Services. Generally, the buyer pays this one-off registration fee.
Ongoing charges
These cover the running costs of the entire village. Costs might include the upkeep of facilities, water rates from common areas, security, staffing costs, insurance (including workers compensation and public liability), contents insurance for common areas, as well as village building insurance.
- Loan or licence arrangement
These are mainly offered by Not For Profit organisations such as religious or charitable village operators, and allow the buyer to live in the unit, but the buyer does not own the unit or have a registered interest in it.
What are the costs associated?
The buyer will pay an entry payment. It might be similar to an ingoing contribution or interest-free loan.
At some villages, you can enter a village contract and pay the ingoing contribution or purchase price at a later date, such as once your home is sold. In such an instance, the buyer might be asked to pay a deposit.
The buyer will also pay regular ongoing charges under a loan or licence arrangement. Check thoroughly the contract to know what the buyer is agreeing to
There will be legal and conveyancing costs as with any property agreement.
Ongoing costs
The buyer will also pay ongoing charges in a loan or licence arrangement. These cover the running costs of the entire village. Costs might include the upkeep of facilities, water rates from common areas, security, staffing costs, insurance (including workers compensation and public liability), contents insurance for common areas, as well as village building insurance.
- Strata or community schemes
Buying a unit in a strata or community scheme is where the buyer pays the agreed purchase price to the owner of the unit under a sale of land contract, making the buyer the owner of the unit and automatically becoming a member of the owners corporation or community association.
The initial costs
The buyer pays a purchase price to own the unit under a sale of land contract.
There will be legal and conveyancing costs as with any property purchase.
The buyer will also pay recurrent charges in a strata or community scheme arrangement. These cover the running costs of the entire village. Costs might include the upkeep of facilities, water rates from common areas, security, staffing costs, insurance (including workers compensation and public liability), contents insurance for common areas, as well as village building insurance.
- Company title schemes (you have shares in the village)
A small number of villages operate under company title, which means it is owned by a company, and the buyer can buy shares at market value.
The shares give the buyer the right to occupy the unit. The buyer has similar selling rights as strata villages. A Board of Directors, appointed by the shareholders, manages the property and the buyer will need to comply with the company’s constitution.
The initial costs
The buyer will pay a price to purchase shares, which are at market value.
There will be legal and conveyancing costs as with any property purchase.
The buyer will also pay ongoing charges in a loan or licence arrangement. These cover the running costs of the entire village. Costs might include the upkeep of facilities, water rates from common areas, security, staffing costs, insurance (including workers compensation and public liability), contents insurance for common areas, as well as village building insurance.
- Rentals
A growing number of operators offer units for rent to retired people. Generally, these types of arrangements are the same as private rental agreements.
What are the costs associated?
The buyer will generally pay a rental bond (maximum four weeks’ rent), regular rent payments and water usage (if you have a separate meter). There are no fees and charges to pay when you leave.
When a potential buyer first visits a retirement village
Retirement village operators must provide a general enquiry document within 14 days of receiving an initial enquiry from (or on behalf of) a prospective resident. This sets out basic information about the village, including the village type, facilities and costs, as well as whether village rules are in force.
In NSW, operators must maintain a 10-year asset management plan for each village they manage or operate and make the plan available to prospective residents. The asset management plan documents the costs of purchase, and ongoing maintenance, repairs and replacement of a retirement village’s major items of capital, including shared major items of capital and, who will pay for them.