How does strata title work with retirement villages?
Strata title villages require residents to buy freehold title to their accommodation (usually a self-contained unit or apartment). The resident then becomes a member of the village’s body corporate (called an ‘owners corporation’ in some States and Territories) and is entitled to vote on matters affecting all owners in the village.
A strata manager (usually the retirement village operator) manages the retirement village on behalf of the body corporate. This service usually includes:
- managing the common property in the village (such as the grounds and other general use facilities).
- providing retirement-related services (such as emergency medical, transport and/or personal services).
Residents who buy strata title apartments in retirement villages must pay a lump sum upfront that will include the price of the accommodation plus stamp duty (called transfer duty in some States and Territories) and any relevant legal fees.
Strata title residents pay ongoing strata levies to the body corporate. These levies will cover the costs of managing the retirement village and providing its range of services to all residents. In addition, ongoing council rates may be payable, as well as the utility bills to their own accommodation.
The strata title owner (or their estate) will usually be charged an exit fee when the retirement village accommodation is eventually sold. This fee amount depends on the terms and conditions of the purchase agreement, and usually includes a percentage to cover the costs of marketing/selling the accommodation, as well as any repairs or renovations that may be necessary.
‘Retirement villages with no exit fees’ are sometimes advertised, but make sure you read the fine print of these agreements before entering into one. You may be charged higher upfront or ongoing fees instead.
The pros and cons of strata title in retirement villages
There are pros and cons of strata ownership in retirement villages. Let’s look at the pros first.
How does leasehold work with retirement villages?
Leasehold retirement villages are where residents pay for a long-term or lifetime lease on the accommodation. Unlike the strata title arrangement, the village owner retains ownership in a leasehold arrangement. However, the lease protects the holder because if the village is sold by the owner, the lease remains in place.
The lease may contain a services agreement that outlines the services the leaseholder is entitled to receive, or this may be contained in a separate agreement. The lease normally ends automatically when the leaseholder dies.
Residents who enter into leasehold agreements in retirement villages usually pay a market value for the lease. This value will depend on the quality of the property and the village facilities that the holder will be entitled to use.
Leaseholders will have to pay ongoing costs depending on the terms and conditions of the lease. These costs will include fees for managing the retirement village and providing its range of services to all residents. In addition, leaseholders must pay utility bills for their own accommodation.
The estate of leaseholders in retirement villages may have to keep paying ongoing costs until the village owner finds a new leaseholder – subject to statutory limitations which may vary from state to state. Renovation or repair costs may also be charged prior to finding a new leasehold buyer, subject to the terms and conditions of the lease.
The pros and cons of leasehold retirement villages
Like strata title villages, leasehold villages also have their pros and cons.
What is better? Strata title or leasehold retirement homes?
There is no right or wrong answer about whether you should buy strata title or leasehold in a retirement village. Each option has its pros and cons depending on your specific financial situation, needs and goals. You should understand the specific terms and conditions relating to the village you are interested in and seek professional advice before making your decision.
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QUOTE OF THE WEEK
Michael Portillo British MP