There are several ways for people to own or occupy premises in a retirement village. People often occupy retirement villages under long-term leases, under license or through strata title ownership.
Under a long-term lease, the occupier is entitled to live in the property for a specified period pursuant to the lease (commonly 99 years). The property developer maintains ownership of the property, but the lease can be transferred by the occupier. Beyond the lease agreement, a ‘service agreement’ sets out the terms and conditions regarding the services provided. Long-term leases usually call for a trustee company to be appointed to take care of the financial aspects whilst a manager is appointed for day-to-day village management.
Under a license, the property developer again maintains ownership of the property, but the occupier provides a long-term loan or donation in return for the right to occupy the property. This is a more cost-effective approach as the cost of entry is substantially lower. The downside however is forgoing the benefit of capital gains that the property might attract as the market matures.
Strata title ownership is the most secure form of occupation with the added benefit of body corporate membership, granting certain rights to contribute to the management of the retirement village. The downside to this arrangement is a higher cost of entry due to stamp duty on the purchase, however, the advantage is accruing capital gains on the property as the market matures.
Choosing a retirement village
The key decision-making usually starts with learning about the options available and understanding the legal and financial obligations that come with each. Once you have an idea of what is available in the area and price range you are looking for, start considering the legal and financial issues that go with the more emotional part of the process.
- What other costs do you need to factor in when you move? Don’t forget to include moving costs and possibly storage costs if you won’t be able to take all your possessions with you and are not yet ready to part with things you cannot fit into your new home.
- Do you have to pay the whole price upfront, or can you pay a portion of the cost and then pay the balance in ongoing instalments?
- Will you need to sell your home first before you can afford to move?
- Will the move into a retirement community affect any pension or rent assistance currently received?
- Understand exactly what you are buying – is the property strata or community titled or does some other form of ownership apply?
- Does the property you are buying form part of your estate after you die? Should you review your Will and estate plan?
- Is the facility able to provide a higher level of care later if your needs change or would you need to move to a different facility if your care needs increased?
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