The cost of village living
23 Oct 2018
It can be one of the most important decisions that you make, so what are the traps, tricks and positives of signing over to a retirement village?
A desire for a built-in community can make moving to a retirement village seem attractive. Or it can seem like an affordable way to downsize and stay in a neighbourhood you know and love.
Access to facilities such as swimming pools, on-site gyms, and cleaning services without all the hard work of managing and maintaining – what’s not to like?
Retirement villages come in all shapes and sizes and as with any housing arrangement it’s important to be well-informed about the legal and financial aspects.
Under a typical contract you do not own the property, but you do have a number of legal rights and responsibilities.
Specific legislation in each state protects your right to occupy your home. Villages may use different legal forms of tenure such as strata title ownership, leasehold estates, licenses to occupy or company share arrangements with related residency entitlements.
It’s important to be aware of the fees and charges associated with retirement village living. These include ingoing costs, ongoing costs, and outgoing costs.
The upfront payment when you enter a retirement village may be described as an ingoing contribution, an interest-free loan, a refundable deposit or as the purchase price, depending on the tenure.
It is recommended dealing with a solicitor who has experience with retirement village contracts and the Retirement Village Code of Practice in your state or territory.
As with any property purchase there will be stamp duty and contract preparation fees. It is recommended dealing with a solicitor who has experience with retirement village contracts and the Retirement Village Code of Practice in your state or territory.
The ongoing costs can come under various labels – the general service charge; recurrent charge; or the weekly service charge. These are designed to cover the cost of using the facilities and services at the retirement village. Remember there will still be everyday costs over and above those charges including utility bills and groceries.
While retirement villages let you buy-in at a below market cost, don’t forget the outgoing costs when you are making a decision about retirement village living.
In particular, take notice of the deferred management fee. This is normally a percentage of the purchase price or the resale price multiplied by a number of years.
Other things to check include whether you will receive a share of any capital gain when you exit; if there is any requirement to reinstate or refurbish the unit; and marketing fees and/or sales commissions to be paid.
As well as seeking legal advice, it’s worth consulting your accountant or financial adviser about your plans to move into a retirement village.
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