When you’ve decided that you’ve had enough of home maintenance and overgrown gardens and are thinking about a more manageable property, many people consider retirement villages.
But what is a retirement village? And is it the right choice for you? In this article, we look at:
- Retirement lifestyle options
- Top traps of buying into a retirement village
- Understanding the different contract types
- Exit and entry fees
We also explore an alternative to retirement villages which offer more flexibility, simpler contracts and could make sound financial sense.
What is a Retirement Village?
A retirement village is a residential community where residents typically own their own homes or apartments.
The community is managed by a retirement village operator, who provides a range of services and amenities such as gardening, maintenance, and security. Residents pay fees to cover these services, as well as any ongoing costs associated with their property.
In Australia, the average age of a retirement village resident is 81 years. These residents have long since retired from work and are looking for an easier, more laidback lifestyle.
Buying into a retirement village is not the same as purchasing a freehold house. The purchase contracts are quite complex and include a set of fees including entry and exit fees, deferred management fees and capital gains fees.
These fees and charges can have a serious impact on how much you receive should you decide to sell your retirement village home.
What is an Over-50s Land Lease Lifestyle Resort?
Land lease community lifestyle resorts for over 50s are designed for more people who aren’t necessarily retired or who are focused on travel as well as living an active lifestyle.
More and more homeowners are seeing the value of land lease communities and are becoming an increasingly popular way for homeowners to maximise their lifestyle and financial options while downsizing their responsibilities.
Unlike retirement villages, land lease communities don’t have hidden nasties like entry, exit and deferred management fees. Best of all, you keep 100 percent of your capital gains!
You can learn more about the difference between retirement villages and lifestyle villages here.
How Does a Retirement Village Work?
Retirement village contracts are complex which can make it difficult to understand exactly what you’re buying into. In some cases, you are purchasing a property. In other cases, you are only purchasing a leasehold contract, which gives you right of occupancy but not ownership of your home.
The first fee you’ll encounter is an entry fee which is also known as an ingoing contribution. Then there are weekly site management fees. When you decide to sell, there are additional charges against the sale of the property, these include exit fees, deferred management fees and capital gains fees.
Depending on the retirement village you choose, there may be specific restrictions on you and your lifestyle such as the stipulation that you must be 55 years or older and no longer working. Other villages won’t allow pets and limit your ability to have family gatherings or guests staying overnight.
You can learn more about how retirement villages work here.
4 Pitfalls of Retirement Villages
Buying into a retirement village can come with a range of potential pitfalls, including high fees and ongoing costs, restrictions on selling properties, and complicated legal arrangements.
Other potential traps may include hidden costs, such as maintenance or renovation fees, as well as limited access to healthcare or other services.
In some cases, operators have faced criticism for aggressive marketing tactics and for failing to provide the services and amenities promised to residents. It is important to carefully consider these issues and to thoroughly research any community before deciding to move in.
Here are some of the traps to look out for:
1. Complex contract types
In Australia, there are several types of contracts for retirement villages.
One common type is a “loan and license” agreement, which gives residents the right to occupy a unit or apartment and use the village’s facilities and services but does not give them ownership of the property.
Other contact types include:
Strata titles
Another type is a “strata title” agreement, where residents own their unit or apartment and share ownership of common areas with other residents.
Freehold agreements
Some villages also use a “freehold” agreement, which gives residents full ownership of their property. In addition, some villages may offer different types of contracts with varying fees and services, such as a “rental” agreement or a “deferred management fee” model.
Land lease communities
Land lease communities or over-50s lifestyle resorts have two agreements – one is for the ownership of the home and another for an on-going site fee which covers the cost of running and maintaining the resort and its facilities.
Before you sign an agreement, make sure you understand the legal and financial implications of each type of contract. This is particularly important if you plan to use the value of your retirement home to later fund nurse care or leave a legacy to your family.
2. Entry, Exit fees & Deferred Management Fees
The entry and exit fees for retirement villages in Australia can vary depending on the type of contract and the specific village.
You may be obliged to pay a fee to simply be placed on the wait list if you have your heart set on a particular retirement village.
Entry fees can range from $100,000 to over $1 million, depending on the size and location of the property.
The exit fee is usually a percentage of the original payment, often ranging from 20 percent to 40 percent and may be subject to further deductions for refurbishment or maintenance costs.
Deferred management fees are charges when you sell your retirement village property.
3. Complex sales process
Selling a retirement village home can be a complex and sometimes difficult process – and that’s quite in addition to the fees you’ll be obliged to pay.
Depending on the type of contract, there may be restrictions on how and when the property can be sold, as well as fees and deductions that must be paid to the village operator. In some cases, residents may need to find a buyer who meets certain eligibility requirements, such as age or health status. Additionally, the market for retirement village homes can be limited, which may make it harder to find a buyer.
It is important for potential residents to carefully consider these factors and seek advice from a qualified professional before entering into a contract.
4. Lifestyle compatibility
Retirement homes and villages can have restrictions on certain activities.
These restrictions are intended to ensure the safety and comfort of all residents, and to prevent disruption or nuisance. However, there has been growing criticism of some of these restrictions, particularly the ban on pets. Many advocates argue that pets can provide important companionship and emotional support for older adults, and that allowing pets can improve residents’ overall well-being.
Retirement villages can have restrictions on the number of visitors, overnight guests, and children staying with residents.
This limits the amount of entertaining residents can do within the retirement village itself. It reduces opportunities for hosting family gatherings and participating in broader family life such as taking care of the grandkids during school holidays. Additionally, some villages may have rules around the use of common areas or facilities, such as restrictions on the number of people who can use a pool or gym at any one time.
It is important for potential residents to be aware of these restrictions and to ensure they are comfortable with them before signing a contract.
Looking for an Alternative? Try Land Lease Communities
While retirement villages can offer a range of benefits for older adults, they may not be the best option for those who are still active and independent.
Fortunately, there is an alternative – one that is simple and offers financial transparency.
Homeowners are enjoying the benefits of land lease communities and are proving popular with active over 50s who are looking to downsize their homes but upsize their lifestyle.
The biggest difference between retirement villages and land lease communities (LLCs) is in the financial structure. In these LLCs, residents own their own home, but lease the land on which it sits.
Let’s take a closer look.
Simple Fee Structure
Compared to retirement villages, land lease community fee structures are simple and straight-forward.
You purchase your home outright. There are no exit, deferred management or capital gains charges. This means, should you decide to sell, the proceeds of the sale of your home are yours – less standard selling costs.
And, as you are purchasing the home, and not the land it sits on, the homes are more affordable and there is no stamp duty to pay.
In these communities, the only on-going fee is a weekly site rental that covers the cost of maintaining the resort facilities. And, if you hold an Australian Pension or Department of Veterans’ Affairs card, you may also be eligible for Federal Government rental assistance which further reduces the site rental fee.
Resorts like GemLife offer high end homes with luxury inclusions and premium resort-style facilities. And, unlike retirement villages there is no requirement for homeowners to be retired. Pets are welcome as are family gatherings and overnight guests.
Low Maintenance
Land lease communities are popular with over-50s who have had enough with the time and expense of maintaining large family homes and are looking for rightsized homes which offer an easy to maintain lifestyle. Garden and pool maintenance are all taken care of.
Homes in these communities can be much more economical to run. GemLife homes are designed to be thermally efficient and to maximise light and natural cooling. They also come with energy efficient appliances as standard. Exclusive to GemLife is the Virtual Power Plant program that uses solar panels and battery storage to greatly reduce residents’ power bills.
Secure Community
Land lease communities for over-50s are often gated communities which offer several benefits for homeowners. One of the most popular reasons is the lock-up-and-leave peace of mind for extended travel.
Look for resorts like GemLife that offer security features such as gated access, number plate recognition, CCTV, and on-site management, which also has strong appeal for solo homeowners.
But even more than the physical security is the emotional security of knowing your neighbours.
You can learn more about why GemLife resorts appeal to homeowners here.
Like-Minded Neighbours
Land lease over-50s lifestyle resorts tend to attract younger people compared to retirement villages, which tends to mean there are greater opportunities to form new friendships and life-long bonds.
Homeowners tend to be around about the same age group and share many of the same life experiences which helps create a sense of connection. In these communities, it is so easy to get to know your neighbours which means there is always someone to call on when there is a need.
Over-50s resorts like GemLife have plenty of facilities to encourage a spirit of community. The Country Club with its grand ballroom is popular for resident-organised events, along with the art studio and resident workshop.
Health and fitness also feature highly for homeowners who get together at the fully equipped gym, tennis and pickleball courts, ten-pin bowling or lawn bowling, in addition to resident-organised aqua aerobics and even high energy Zumba classes.
Discover the GemLife Difference
GemLife resorts across Australia are land lease communities especially designed for active over 50s.
And there are a lot of benefits to purchasing with GemLife when you’re looking to ‘rightsize’ your lifestyle as an active over 50.
Our resorts are in some of Australia’s most desirable locations that have been carefully selected to be close to local shops, amenities and easy access to transport links.
To learn more about GemLife, our facilities, and resort locations, enquire with us today, or request an info pack.