Buying into a retirement village is not the same as purchasing a home. You’ll encounter new terms such as entry fees, deferred management fees, exit fees, capital gains fees and more.
In this article, we take a look at deferred management fees.
What are Deferred Management Fees?
Deferred management fees are charged in some retirement villages in Australia.
As the name implies, the charge is a deferral of the ongoing management fees. The operator will calculate this fee as a percentage of the property sale price. The fees are payable by the resident when the unit is sold, and are deducted from the sale price before the resident receives the proceeds.
The percentage of the deferred management fee can vary depending on the retirement village but is typically between 20 percent and 40 percent.
Deferred management fees can be a significant cost for retirement village residents, particularly if they decide to sell their unit soon after moving in. However, they can also provide benefits in terms of maintaining and improving the village and its facilities.
Are Deferred Management Fees and Exit Fees the Same?
No, there is a difference between exit fees and deferred management fees in retirement living in Australia.
Exit fees are a broad category of fees that operators may charge when a resident leaves a retirement village. These fees can include deferred management fees, as well as other costs such as capital gains fees, recurrent charges, or other fees specified in the contract.
Deferred management fees, on the other hand, specifically refer to fees that are charged as a percentage of the sale price of a resident’s unit or apartment when it is sold. These fees are intended to cover the cost of providing services and amenities to residents while they are living in the village.
While deferred management fees are a type of exit fee, not all exit fees are deferred management fees.
The presence and amount of deferred management fees can vary widely between retirement villages, and it’s important to carefully review the terms and conditions of any contract before signing.
Why Do Retirement Villages Charge Deferred Management Fees?
The purpose of deferred management fees is to cover the cost of services and amenities to residents while they are living in the village. This can include maintenance, repairs, security, and the upkeep of communal areas and facilities.
It’s important to carefully review the terms and conditions of any retirement village contract before signing.
We recommend that you seek advice from a financial advisor or legal professional if you have any concerns or questions about deferred management fees or other costs associated with retirement living.
Are There Different Types of Deferred Management Fees?
There are distinct types of deferred management fees that may be charged by retirement villages in Australia. The most common include:
Standard
Facility operators will calculate this this fee as a percentage of the sale price of the resident’s unit or apartment when it is sold. The percentage can vary depending on the village but is typically between 20 percent and 40 percent. The fee is deferred until the unit is sold and is deducted from the sale proceeds.
Fixed
This fee is a fixed dollar amount that is charged when the resident leaves the village. The amount can vary depending on the village and is specified in the contract. The fee is typically deferred until the unit is sold and is deducted from the sale proceeds.
Capped
This fee is calculated as a percentage of the sale price, but with a cap on the maximum amount that can be charged. The cap is usually specified in the contract and can vary depending on the village.
Graduated
Operators will calculate this fee as a percentage of the sale price, but with a lower percentage charged for the first few years of residency and a higher percentage charged for later years. This type of fee is designed to encourage longer-term residency in the village.
How Do You Calculate Deferred Management Fees?
The calculation of the deferred management fee can be quite complex, and will likely include the following factors:
- The original purchase of the unit or apartment
- The length of time the resident has lived in the village
- Any capital improvements or refurbishments made to the unit or apartment
- Any other costs associated with the upkeep and maintenance of the village
Once these have been taken into account, the deferred management fee is calculated as a percentage of the sale price of the unit or apartment when the sale goes through. The fee will then be deducted from the proceeds before being transferred to the resident.
Here’s a little snapshot of what the costs of a retirement village can look like compared to a land lease community like GemLife:
Do All Retirement Living Options Charge Deferred Management Fees?
No, not all types of retirement living in Australia charge deferred management fees.
Other retirement living options, such as land lease communities, manufactured home parks, or granny flats, may have different fee structures that do not include deferred management fees.
Do Lifestyle Communities Charge These Fees?
For example, in a land lease development, residents typically own their own home but lease the land on which it sits. The fees in these developments may include site fees, which cover the cost of maintaining the communal areas and facilities, but do not typically include deferred management fees.
Why Consider GemLife For Your Next Move?
There are several different reasons to consider GemLife for your ‘rightsizing’ move.
For many of our homeowners it’s about no longer having to worry about the maintenance and repairs on a larger older home and its gardens. For others, it’s about making new friends with like-minded people who are enjoying the next chapter of their lives.
But let’s look deeper at some of these reasons.
Premium Facilities and Resort Locations
GemLife resorts, located at some of the most sought-after destinations in Australia, including Woodend, the Gold Coast, Lake Cathie and the Sunshine Coast.
It’s like living at a five-star holiday resort all year around. Our award-winning Country Clubs feature premium facilities that are designed for entertainment, leisure, sport and activities.
Typically, Country Club features include:
- Grand ballroom with theatre stage
- Indoor heated swimming pool with spa and sauna
- Golf simulator
- Ten-pin bowling
- Games room
- Luxury cinema
- Hair salon
In addition, the resorts come with other recreational facilities, including sports courts such as tennis and pickleball, walking trails and secure off-leash dog runs.
Beautiful Homes
Imagine a luxurious new home with premium European appliances, ducted air-conditioning, solar panels and window coverings all included as standard – not extras. GemLife homes are also designed to be energy efficient and low maintenance.
The homes have been thoughtfully designed for entertaining family and friends with each featuring open plan indoor-outdoor spaces, and plenty of room for overnight stays from the grandkids. They also have the benefit of being in a secure, gated community which gives you ‘lock up and leave’ peace of mind when you travel.
No DMFs, No Stamp Duty & Zero Stress
GemLife does not charge deferred management fees and, should you decide to sell, all the capital gains are yours to keep.
Because GemLife is a land lease community resort, you do not pay stamp duty when you purchase your home and, if you have an Australian pension or a Department of Veterans’ Affairs card, you may be eligible to receive rental assistance toward the modest weekly site fees.
Downsize in Style, Without the Burden of Hidden Fees
If hidden fees are something that concerns you about downsizing your home, we invite you to see the GemLife difference for yourself.
GemLife charges no deferred management fees or exit fees. You own your home outright and only pay a modest weekly site fee which covers onsite management and maintenance of the resort.
We’d love to hear from you, our friendly team is available to answer any questions that you have and can book a resort tour. Alternatively, request an info pack today.
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