Consider all costs of retirement villages
THE decision to purchase a unit in a retirement village is, for most older Australians, one of the largest financial and lifestyle decisions of their lives.
As important as it is to select the right village, the right location, the right village facilities and the right purchase price, it is vital that prospective residents consider upfront the financial commitments they (or their estate) will have when it comes time to exit the village.
This consideration can often be overlooked or not fully appreciated when buying into a retirement village leading to the majority of retirement village disputes coming to light when a resident departs the village.
The financial obligations vary depending on the type of land holding the resident takes when buying into a village.
The usual forms of tenure available in the retirement village market include freehold, leasehold and licence.
If the unit is purchased as freehold the resident becomes the registered owner of their unit.
Stamp duty is payable by the resident on the purchase contract for the unit.
Once the resident vacates the unit the resident must pay the cost of reinstating the unit.
If the unit is purchased as leasehold or under a licence you do not own the freehold to your unit.
No stamp duty is payable on the lease or licence.
Once you vacate the unit you are required to pay a proportion of the costs for reinstatement of the unit only if you have a right to receive any capital gain on the resale of the unit (otherwise the operator must pay all reinstatement costs).
A resident should take the exit costs and fees into account when deciding to move into a retirement village as they can have a significant impact on the pool of funds available to the resident (or their estate) once they leave the village.