Land lease communities,often called lifestyle villages or over-50s resorts,have changed significantly over the past decade. Once an affordable housing option for permanent residents of caravan parks,these communities have morphed to include luxury resorts with six-star facilities.
Once an affordable housing option for permanent residents of caravan parks,land lease communities have morphed to include luxury resorts.Supplied
Your land lease community agreement is two contracts in one. The first is to purchase the home and any add-ons such as upgraded appliances,stone benchtops and alfresco areas. Home prices vary widely,with modest homes selling for as little as $80,000,to luxury homes that can cost more than $1.3 million.
The other contract is the lease for the land. Your “site fee” amount depends on the community’s location and amenities,although most communities try to keep the fees within the limits for Commonwealth rent assistance,around $200 per week,knowing that many residents are reliant on this payment.
The changes would strengthen registration requirements and introduce the need to provide a comparison document and a capital maintenance plan. Currently,many site fees are subject to a “market price review” which can result in significant,unexpected price rises that make it very tough for residents to budget for. The new changes would limit site fee increases to be in line with inflation (3.5 per cent) for new and existing residents.
The other big change is that operators would need to buy back unsold homes after 18 months. Under this change,the resident would need to provide the operator with an opportunity to sell the home. If the home is not sold after six months,and the resident has vacated the property,they can opt in to the buyback arrangement.
The price of the buyback would be agreed between the operator and the resident. If they can’t agree,an independent valuation may be necessary. After 12 months,if the home remains unsold the operator would have to reduce their site fees by 25 per cent. If the home remains unsold after 18 months the operator would have to buy it back.
Most land lease communities have a simple model,they profit from home sales and site fees. The changes would encourage land lease operators to keep home prices low – after all,they could be the future buyer.
Capping site fees would not just limit profit but risk loss where expenses increase by more than inflation. Reducing profit upfront and while you live there only leaves one other avenue – an exit fee when you leave – which makes land lease communities look even more like retirement villages.
Moves like these by a state government are often copied by other states and territories,as we have seen in the past with retirement village reform. Greater transparency and certainty is definitely a win for land lease community residents,but we will need to see if the trade-off is exit fees.
Rachel Lane is the author of the bestselling bookAged Care,Who Cares? andDownsizing Made Simplewith fellow finance expert Noel Whittaker. The new edition ofDownsizing Made Simple is now available.
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