The Loan/Lease model is utilised by probably 80% of Retirement Villages in Australia including Hume Retirement Resort (HRR) and there is a good reason for that. It provides for a mutual benefit whereby residents can enjoy a higher standard of living in retirement than they would normally be able to afford and owners can adequately fund ongoing development of their village and return a profit.
However, it is also probably the most misunderstood and misrepresented type of housing solution there is. In fact it is often portrayed as being at best mysterious and at worst, downright “dodgy”.
So in order to get a clear understanding let’s cut the “BS”, talk plain English and divide the concept into three parts as follows.
In order to become a resident you must pay an Entry Payment for the premises you wish to occupy and this payment goes to the owner in the form of an interest free loan for the period of your occupancy. You are provided with a 99 year lease and you have exclusive use of your residence and access to all the facilities the village has to offer. You will be required to sign three documents; a Contract, a Lease and a Loan Agreement. There is no Stamp Duty to pay and only very minimal legal costs.
The day to day costs of running the village are shared by all residents in the form of a monthly fee known as a Recurrent Charge. This Recurrent Charge covers such things as Council Rates, Water Rates, Lawn Mowing, Gardening, Insurance, Interior and Exterior Building Maintenance and so on. As at 1/7/19 this charge at HRR was less than $400 per month and annual increases are tied to CPI.
When you permanently vacate your premises your original Entry Payment plus 100% of any Capital Gain is returned to you or your Estate. From the New Entry Payment (Sale Price) the owner is entitled to deduct a Deferred Management Fee (DMF) or Exit Fee as detailed in the original contract documents. At HRR our DMF is calculated as 9% for the first year and 3% for subsequent years to a maximum of 33% (calculated on a daily basis). You are at liberty to set the sale price and appoint an independent Real Estate Agent to sell your premises or you can have HRR handle the sale for you. In either case selling fees will apply.
The Loan/Lease model is totally transparent and understandable and all your rights and obligations, as well as those of the owners, are clearly spelt out in the documents you sign upon entry to the village. There are no hidden surprises down the track and you are able to “live the life of Reilly” on a very modest budget.
Additionally, Hume Retirement Resort, is a registered Retirement Village and as such it operates strictly under the guidelines of the Retirement Villages Act and Regulations in NSW ensuring that your rights as a resident are protected by Legislation.
If you would like to know more about Loan/Lease Agreements, or you have other questions about Retirement Village living, please do one or both of the following:
1/ Contact Kelvin Gilder on (02) 60258409 or email firstname.lastname@example.org
2/ Search NSW Fair Trading www.fairtrading.nsw.gov.au