Entry Fees
A resident's right to occupy a unit in a retirement village typically takes one of two forms:
- Loan / lease agreement
- Freehold title
Another common form of occupation right is a loan / licence agreement, which is very similar to a loan / lease agreement.
Loan / lease agreements are a common form of long-term property interest enjoyed by residents of retirement villages in Australia, and are a common form of ownership in other places such as London.
In Australian retirement villages, a typical loan / lease agreement provides for lifetime (99 year) occupancy of a chosen villa or apartment and use of the community facilities (this right is protected under State Government legislation – see Making the Move, Consumer Protection).
It involves the payment of an upfront entry fee in much the same way as the purchase of traditional real estate. This payment is sometimes referred to as an 'ingoing contribution'.
A major benefit of this upfront entry fee is that it usually isn't subject to the payment of stamp duty or GST, which means the resident is left with more money to spend on enjoying themselves in their retirement years*.
While prospective residents should conduct their own investigations, the entry fee payable under a loan/lease agreement will typically equate to no more, and is often less, than the average per square metre price of similar quality residential properties in the immediate area.
The lease will typically be granted for a long term – usually, a period of 99 years. When a resident leaves the village, they will surrender their lease and the village owner will grant the new resident a fresh lease for a new life time term. This ensures that each new resident obtains a lease to occupy the unit for the same duration as the previous resident.
While less common, freehold title operates in much the same way as a traditional residential property in that title to the unit is held by the resident. In some cases, the purchase of the property is subject to stamp duty and / or GST.
* Subject to payment of recurrent fees as and when they fall due