Entering a retirement village

Retirement villages are an independent living option. In most cases the person does not own their residence. The person buys the right to live in a retirement village under a variety of different commercial arrangements.

Each option may raise different issues for stamp duty, GST, service charges and fees, security of tenure, termination, vacating the premises, capital gain or loss and credit risk.

Clients must get legal advice to make sure they understand the contracts – not only their costs, but also rights and obligations, and what they can and can’t do living in the village.

Contract types

Loan and lease arrangements

These are the most common arrangements in a retirement village. Upon entering the retirement village, the resident pays an entry contribution amount in the form of an up-front deposit. There is a lease for a right to occupy with exclusive possession. Leases are long term,  usually expressed for 50 years or 99 years. The resident has a propriety interest which is typically registered on the title. The client has added protection should the village be sold, as the lease remains in place.

Under leasehold arrangements with more than one person they are considered to hold the lease as joint owners (not tenants in common). This means that upon death of one owner the other person would inherit the full asset regardless of anything written in the will.

Loan and license arrangement

Upon entering the retirement village, the resident pays an upfront interest free loan. Sometimes a proportion of the loan is non-refundable (sometimes called a ‘donation’). The license allows the right to occupy with non-exclusive possession; village operator retains the right to access and control the premises.  The resident has a contractual interest, which is not registered on the title.

Strata schemes

In a strata scheme, the resident owns the unit, similar to owing a home. It is purchased from a departing owner. They become a member of the owner’s corporation, as with any other strata scheme. Unlike other strata schemes, the resident is required to enter into a service contract with the operator before they can move in.

Rental arrangements

A small number of villages, usually offering self-contained premises, operate solely on a rental basis. The tenant signs a residential tenancy agreement and pay rent like other tenants.

Company title schemes

The retirement village is owned by a company, in which the resident purchase shares at market value. The shares give the resident the right to occupy the premises. The resident is considered under the retirement village laws to own the premises and have similar selling rights. Shareholders will appoint a Board of Directors to operate the village.

The resident is required to comply with the company’s Articles of Association.

Considering a move to a retirement village? Make sure you understand the fine print before you sign. With so many contract types and financial implications, the right advice can save you time, money and stress down the track.

Book a chat with Bill to make confident, informed decisions about your future.

Bill Savellis

Senior Financial Adviser

Having navigated the Aged Care landscape for both of his parents, Bill understands how challenging it can be to make the right decisions for your future care needs. That's why he believes that everyone should have access to financial advice during this time. Bill has been a Financial Adviser for over 22 years, and is passionate about helping others access the financial advice they need. Drawing from his own experience in the financial sector, Bill develops strategic, personalised plans to support transitions to Aged Care or Home Care.

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Disclaimer: Prepared without taking into account your objectives, financial situation or needs. Before acting on any information in this article, Olive Grove Financial Advice recommends that you consider whether it is appropriate for your circumstances. Information in this article was correct and current as of 8 October 2024. Olive Grove Financial Advice is operated by Bill Savellis through The Financial Advisor (Australia) Pty Ltd ABN 72 619 546 431, who is a Corporate Authorised Representative (No. 1278394) of Havana Financial Services Pty Ltd.