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Types of contracts: Leasehold, license, freehold
Costs and contracts

Types of contracts: Leasehold, license, freehold

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Types of contracts: Leasehold, license, freehold

A retirement village contract will differ between villages, properties, and states or territories. A contract sets out everything you need to know about moving in, living in and leaving. It also outlines the details of your residency, your obligations and your rights. It’s important to review these documents thoroughly and have any questions answered before signing.

Independent solicitor Danielle Lim says that retirement village contracts often deal with three different types of tenure: Leasehold, licence and freehold.

In some options, you become the registered owner and are listed on the property title. In others, you will be a long-term lease holder. See below for more information about common contract types, but it’s important to know that there may be more.

Always ask the retirement village you’re interested in about all the contract options available and seek independent legal and financial advice to help you make the decision that’s right for you.

Leasehold contracts

A leasehold contract is the most common type of contract in Australian retirement villages.

If your retirement village uses a leasehold contract, this means that the village operator owns the property you are moving into and you will be signing a long-term lease, which can often be 45, 50 or 90 years. This involves the payment of an ingoing contribution for the exclusive right to reside in the property.

Leasehold properties can have lower upfront purchase costs compared to freehold properties. You’re also likely to have more retirement villages to choose from, given the popularity of this contract type.

Leasehold units can be great for retirees for many reasons, including:

  • You have exclusive rights to your home, just like owning it
  • Your leasehold may be registered on the property title, giving you an extra layer of protection
  • You’re likely to have to deal with less documents than if you were purchasing freehold – most operators have a single lease contract you enter into.

The entry payment for leasehold contracts is essentially the cost of residing in the property. This cost will vary depending on the village, and the amenities, facilities and services on offer, and the specific unit you are looking at, including its size, location within the community and whether it has been recently renovated.

Some leasehold payment options allow you to pay a higher entry payment, in exchange for reduced exit fees.

Living in fees

While living in a retirement village under a contract, you will need to pay an ongoing fee/general service charge either weekly, fortnightly, or monthly. This covers the costs of running the retirement village. These fees can vary widely between villages based on the facilities available and the size of the village. Always read the village comparison information documents for the village you’re interested in to find out what the most recent fees are. With leasehold contracts, there may be different ways you can pay your management fees, so always check with the village you’re interested in.

Exit fees

Some retirement village operators will let you pay greater entry fees and no, or reduced, exit fees. These contract options can differ widely, so it is important you fully understand your exit fee obligations.

Depending on the terms of your contract, you may also have to pay the operator:

  • a share of any capital gains
  • other charges deducted from your exit entitlement.

Other fees

Different retirement villages will have different fees that are outlined within their leasehold contracts. Always read these carefully to ensure you know what fees you’ll need to be paying and when.

License contracts

A licence contract can be very similar to a leasehold, but the main difference is that you are not registered on the property title. However, additional protection of your residence right is provided under the Retirement Villages Act in the relevant state.

Freehold contracts

Freehold contracts for retirement village homes are becoming less common, and can differ widely, so please seek expert independent advice if you’re considering purchasing a freehold home. A freehold contract for a retirement village property is similar to the ‘traditional’ residential property tenure contracts you might be familiar with, but with a few differences.

Under a freehold contract you will own the apartment, villa or unit on a strata title and pay stamp duty - similar to if you were buying a regular house or apartment.

Your village will most often be a strata title, and upon signing your freehold contract, you’ll then become a member of the village’s body corporate (called an ‘owners corporation’ in some states and territories) and will be entitled to vote on matters affecting all owners in the village.

Buying a freehold property at a retirement village can cost more than a leasehold property. You may be required to cover additional maintenance costs, and will likely have to pay usual ongoing contribution costs on top of general services charges.

However, one of the key benefits is that you will likely have a greater say in how the retirement village is managed by being able to vote on body corporate/owners’ corporation matters.

Always look closely at the contributions you’ll need to make when you move in, when you’re living there, and when you leave. These will all be outlined in freehold contracts.

How do retirement village contracts compare to typical rental contracts?

Retirement village contracts are quite different from the typical residential property contract that you may be familiar with. Real estate experts say that a residential property contact may be a short document that largely outlines what happens on settlement day, or have more information if the property is in a body corporate/owner’s corporation.

Retirement village contracts, on the other hand, can be quite lengthy documents. They outline the obligations when you begin the moving process, on settlement day, on the days you live in the village and the day you leave.

Another difference relates to the process of selling. Often a retirement village operator will have a greater hand in the selling process when you leave, and there is generally an agreement about how the purchase price will be shared between the resident and the operator.

Retirement village contracts are also regulated by state legislation and are designed to protect you as a resident. All retirement village operators have their own contract options, so it's important that you understand their terms and which contract is right for you.

How you're protected

When you’re looking to purchase in a retirement village, most states require operators to provide an in-depth disclosure statement upfront.

The operator is required to tell you things like:

  • How much it costs to move in, live in and leave
  • Operator accreditation
  • Pet and visitor policies
  • Who is responsible for property maintenance
  • Other inclusions/exclusions.

In addition, the retirement village owner, or the owner’s agent, must give you a copy of the contract at least 21 days before you sign it. However, you can take more time to consider your decision.

Search online for the Retirement Villages Act in your state or territory to find out more.

The information provided is current as at April 2024 and is subject to change. It is general in nature and is not personalised for your unique needs, objectives or financial situation. Some information may be provided by a third party. Aveo encourages you to seek independent legal and financial advice about your particular circumstances before moving to an Aveo retirement village.

A retirement village contract will differ between villages, properties, and states or territories. A contract sets out everything you need to know about moving in, living in and leaving. It also outlines the details of your residency, your obligations and your rights. It’s important to review these documents thoroughly and have any questions answered before signing.

Independent solicitor Danielle Lim says that retirement village contracts often deal with three different types of tenure: Leasehold, licence and freehold.

In some options, you become the registered owner and are listed on the property title. In others, you will be a long-term lease holder. See below for more information about common contract types, but it’s important to know that there may be more.

Always ask the retirement village you’re interested in about all the contract options available and seek independent legal and financial advice to help you make the decision that’s right for you.

Leasehold contracts

A leasehold contract is the most common type of contract in Australian retirement villages.

If your retirement village uses a leasehold contract, this means that the village operator owns the property you are moving into and you will be signing a long-term lease, which can often be 45, 50 or 90 years. This involves the payment of an ingoing contribution for the exclusive right to reside in the property.

Leasehold properties can have lower upfront purchase costs compared to freehold properties. You’re also likely to have more retirement villages to choose from, given the popularity of this contract type.

Leasehold units can be great for retirees for many reasons, including:

  • You have exclusive rights to your home, just like owning it
  • Your leasehold may be registered on the property title, giving you an extra layer of protection
  • You’re likely to have to deal with less documents than if you were purchasing freehold – most operators have a single lease contract you enter into.

The entry payment for leasehold contracts is essentially the cost of residing in the property. This cost will vary depending on the village, and the amenities, facilities and services on offer, and the specific unit you are looking at, including its size, location within the community and whether it has been recently renovated.

Some leasehold payment options allow you to pay a higher entry payment, in exchange for reduced exit fees.

Living in fees

While living in a retirement village under a contract, you will need to pay an ongoing fee/general service charge either weekly, fortnightly, or monthly. This covers the costs of running the retirement village. These fees can vary widely between villages based on the facilities available and the size of the village. Always read the village comparison information documents for the village you’re interested in to find out what the most recent fees are. With leasehold contracts, there may be different ways you can pay your management fees, so always check with the village you’re interested in.

Exit fees

Some retirement village operators will let you pay greater entry fees and no, or reduced, exit fees. These contract options can differ widely, so it is important you fully understand your exit fee obligations.

Depending on the terms of your contract, you may also have to pay the operator:

  • a share of any capital gains
  • other charges deducted from your exit entitlement.

Other fees

Different retirement villages will have different fees that are outlined within their leasehold contracts. Always read these carefully to ensure you know what fees you’ll need to be paying and when.

License contracts

A licence contract can be very similar to a leasehold, but the main difference is that you are not registered on the property title. However, additional protection of your residence right is provided under the Retirement Villages Act in the relevant state.

Freehold contracts

Freehold contracts for retirement village homes are becoming less common, and can differ widely, so please seek expert independent advice if you’re considering purchasing a freehold home. A freehold contract for a retirement village property is similar to the ‘traditional’ residential property tenure contracts you might be familiar with, but with a few differences.

Under a freehold contract you will own the apartment, villa or unit on a strata title and pay stamp duty - similar to if you were buying a regular house or apartment.

Your village will most often be a strata title, and upon signing your freehold contract, you’ll then become a member of the village’s body corporate (called an ‘owners corporation’ in some states and territories) and will be entitled to vote on matters affecting all owners in the village.

Buying a freehold property at a retirement village can cost more than a leasehold property. You may be required to cover additional maintenance costs, and will likely have to pay usual ongoing contribution costs on top of general services charges.

However, one of the key benefits is that you will likely have a greater say in how the retirement village is managed by being able to vote on body corporate/owners’ corporation matters.

Always look closely at the contributions you’ll need to make when you move in, when you’re living there, and when you leave. These will all be outlined in freehold contracts.

How do retirement village contracts compare to typical rental contracts?

Retirement village contracts are quite different from the typical residential property contract that you may be familiar with. Real estate experts say that a residential property contact may be a short document that largely outlines what happens on settlement day, or have more information if the property is in a body corporate/owner’s corporation.

Retirement village contracts, on the other hand, can be quite lengthy documents. They outline the obligations when you begin the moving process, on settlement day, on the days you live in the village and the day you leave.

Another difference relates to the process of selling. Often a retirement village operator will have a greater hand in the selling process when you leave, and there is generally an agreement about how the purchase price will be shared between the resident and the operator.

Retirement village contracts are also regulated by state legislation and are designed to protect you as a resident. All retirement village operators have their own contract options, so it's important that you understand their terms and which contract is right for you.

How you're protected

When you’re looking to purchase in a retirement village, most states require operators to provide an in-depth disclosure statement upfront.

The operator is required to tell you things like:

  • How much it costs to move in, live in and leave
  • Operator accreditation
  • Pet and visitor policies
  • Who is responsible for property maintenance
  • Other inclusions/exclusions.

In addition, the retirement village owner, or the owner’s agent, must give you a copy of the contract at least 21 days before you sign it. However, you can take more time to consider your decision.

Search online for the Retirement Villages Act in your state or territory to find out more.

The information provided is current as at April 2024 and is subject to change. It is general in nature and is not personalised for your unique needs, objectives or financial situation. Some information may be provided by a third party. Aveo encourages you to seek independent legal and financial advice about your particular circumstances before moving to an Aveo retirement village.

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