What are the Different Types of Retirement Village Arrangements?

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  • There are several different types of retirement village arrangements which vary in the degree of occupancy and ownership. Accordingly, this gives rise to different contractual rights and obligations depending upon the specific retirement village arrangement you may have with the village operator. It is important to consider the different types of retirement village arrangements to ensure that it is best suited to your situation. The different arrangements include:
  • Leasehold arrangements;
  • Strata or Community Schemes;
  • Loan and Licence Arrangements;
  • Company Title Schemes; and
  • Rental Arrangements.

Leasehold Arrangements

A leasehold is an arrangement where the village operate owns the dwelling and the residents signs a lease to occupy the dwelling for a set period of time. The Retirement Villages Act 1999 (NSW) (the Act) recognises 4 different types of leasehold title:

  1. Registered long-term leases of a term greater than 50 years (s 7 of the Act).
  2. Registered long-term leases which entitle the resident to a share of 50% in at least 50% of the capital gain (s 7 of the Act).
  3. Leases which are assignable and terminate on assignment rather than on permanent vacation s 129 of the Act).
  4. Leases of any other kind which are not registered or, have a term less than 50 years or, entitle the resident to less than 50% of the capital gains and which may or may not be assignable (s 4 of the Act).

Any lease that is for a period of time greater than 3 years is required to be registered on the title deed. Although, leasehold arrangements are commonly for 99 years or more.

Strata or Community Scheme

Under a strata or community scheme, you will enter into a contract for the sale of land by paying the the agreed purchase price to the owner of the unit. As per any strata or community scheme this will make you the owner of the unit and you will automatically become a member of the owner’s corporation or community association. As such, this will mean that your rights and obligations as the owner of a strata or community scheme will be pursuant to the Strata Schemes Management Act 1996 or the Community Land Management Act 1989, respectively.

Particularly, as a member of the owner’s corporation or the community association, on a quarterly basis you will have to pay levies to cover the maintenance of the common property. There may also already be an existing agreement between the owner’s corporation or the community association with the village operator, often for the life of the village, to help the village operator carry out its functions in managing and administering the scheme’s common property.

Furthermore, as well as entering into a sale of land contract, you will be required to enter a service contract

Also, as the owner of the unit, you will be entitled to sell the unit and appoint any qualified person to act as your selling agent. Under the terms of service contract however, you may have to pay the operator a share of any capital gains.

Loan and Licence Arrangements

Loan and Licence arrangements vary from leasehold arrangements in that you do not own or have a registered interest. These types of arrangements are generally offered by non-profit organisations such as charity and church village operators which provided a contract that allow you to live in a unit. An ingoing contribution to the operator will have to paid, usually in the form of an interest free loan that may include a non-refundable donation. Regular recurrent charges will also have to be paid on the basis determined by the operator. For example, every fortnight or month.

Company Title Schemes

In some respects, company title schemes operate similarly to a strata or community scheme. The difference is that the village is owned by a company in a company title scheme and in order to gain the right to occupy the unit you must purchase shares at market value. As an occupant, you will be required to comply with the company’s constitution and the management provided by the Board of Directors, which is appointed by the shareholders. Occupants enjoy similar selling rights to that of strata villages.

Rental Arrangements

Rental arrangements are not as common and operate similarly to the way people in the general community use a rental arrangement. In this manner, you will sign a residential tenancy agreement and pay rent like other tenants. If there is a term that excludes the application of retirement village laws, your agreement will be covered by the Residential Tenancies Act 2010. Under this arrangement, there are no ingoing contributions that are payable when you enter the village or fees and charges when you leave. Generally, to occupy the unit you will have to pay a rental bond (maximum 4 weeks rent), regular rent payments and water usage (if separate meter is used).