Land lease communities and retirement villages both do a great job providing a wide range of housing and lifestyle options specifically for over 50s.

Land lease communities - also known as manufactured home estates, over 55s villages or residential parks - are usually new village developments, often on former caravan park sites in spectacular locations.

Retirement villages are a well established type of housing which have their foundations in the work of not-for-profit organisations to provide accommodation for retired people.  

Most Australian States and Territories have different legislation in place for land lease communities and retirement villages.

This means that, if you are looking at buying, there are subtle but important differences between these two models. 

If you are investigating either housing model, it’s worth understanding these differences.

1) Location, location, location

Land lease homes need to be physically connected to the ground, on their own designated site, and are required to be technically relocatable. 

These communities are usually located in regional or outer metro areas, where land is more affordable and a land lease model is both economically feasible and in many cases an extension of the original land use.

Retirement villages in lower density form are commonly found in these outer metropolitan and regional areas, but can also be found in busy and bustling inner metropolitan locations. 

The reason for this is because retirement villages can be economically viable in the inner metropolitan areas, particularly when they are developed in high rise form.

In fact, according to 2020 research by the Property Council of Australia, over half of new retirement village developments have a multi-level element.

2) The title and your tenure

Much of the differences between land lease communities and retirement villages are reflected in the legal title or occupancy right outlined in the contract.

In a land lease community, you own the dwelling but not the land that it stands on. 

You pay an upfront cost to buy the dwelling (which remains yours) and then sign a long-term lease with the operator to locate the dwelling on the operator’s land. Specific details vary from community to community, as well as within different States and territories.

While a long-term land lease is in place, and the house is yours to move if you choose to do so, in the longer term, there is the prospect that if the land is to be redeveloped, you may be required to move your home to a new site. This rarely happens, but it is worth keeping in mind.

As well as legal occupancy and tenure agreements, most land lease communities have local rules, covering things like pets, visitors and maintenance requirements.

Retirement villages have a different form of legal title and occupancy rights, where buyers either own outright, or have a long-term right to lease or occupy, the dwelling. 

3) Fees at the start, including stamp duty

The good news is that land lease community agreements do not attract stamp duty. 

This makes sense, as you are long-term leasing rather than buying the land the property sits on.

Most retirement village arrangements do not involve stamp duty, however, if your chosen village is a freehold, strata or community title (in other words if you are going to be an outright owner of the dwellings), stamp duty is an expense you’ll need to factor in.

The good news is that both land lease home prices and retirement village entry fees are almost always substantially less than the median house price in the same area.

4) Fees as you go

In a land lease community, you pay weekly or monthly rent for the privilege of having your purchased dwelling on the community’s land.

There are no published averages however figures from ASX listed operators report averages of between $800 - $930 per month. 

You’ll then likely be responsible for your own power, water use and communications costs.

In a retirement village, you do not pay ground rent as such. 

However, there are ongoing service charges that cover everything from staff wages to maintenance of shared spaces like gardens, gyms and swimming pools. Unlike land lease communities, retirement village operators are typically only allowed to recoup costs through these fees, not make a profit.

Villages vary in whether their ongoing service charges cover costs like insurance and utilities. However, across Australia, in 2020, the average retirement village service fee was $518 a month.

5) Fees when you exit

Most land lease communities do not have a charge upon exiting the community, although this is not always the case. 

On the flipside, while most retirement villages are significantly cheaper than other property in the area, making them affordable, many will have an “exit fee” in place (commonly referred to as ‘deferred management fees’ or ‘departure fees’). These fees are often calculated as a percentage of your incoming contribution and linked to the length of your occupancy. 

Again, however, you will find that some retirement villages have pricing options which can be structured to allow you to avoid any applicable exit fees.

The important point is to ask lots of questions and explore whatever options are available, to best suit your needs. Most operators are more than willing to have discussions about mutually satisfactory solutions. 

6) Retirement villages are increasingly focussed on care needs

In 2020, 30 percent of retirement villages were co-located or in close proximity to an aged care home, making a move less disruptive. 

In 2019, four out of ten retirement villages were operated by a provider who was also an approved home care provider, making the navigation of home care more streamlined.

7) The people in your neighbourhood

As anyone at retirement age can choose between land lease communities and retirement villages, there is no clear difference about who your neighbours will be.

Some newer land lease communities are actively marketed to anyone from aged 50 up. However, you will find older retirees living in land lease communities, particularly those that have been established for longer.

The average age of residents entering retirement villages in 2020 was 75, up just slightly on 2019 figures, while the average age of existing residents was 81. 

However, this might start to change, as retirement villages are keen to encourage people to make the move while they are still healthy and fit.

In short, the type of residents in your proposed future community is something you’d look at on a case-by-case basis, irrespective of whether it is a retirement village or land lease community.

8) Rent assistance

Government rent assistance is a possibility for anyone on a low income.

If you receive the age pension and live in a land lease community, you are likely eligible for this significant additional weekly payment.

If you move to a retirement village, it is likely that you will only be eligible if your entry (or ‘incoming’ fee) is less than $214,500 or if your village is a rental village only.

Comnent from our CEO

Downsizing.com.au CEO Amanda Graham said: “Land lease communities and retirement villages both offer many fabulous benefits for those keen to downsize into retirement living. We hope this guide to their differences will help you navigate the fine print and find the best option for you”

Keen to read more?

Looking for your ideal land lease or retirement village? You’ve come to the right place. Start your search today.

Please note the above advice is general in nature should not be relied upon for financial or legal decisions. Consumers should seek their own independent financial and legal advice before purchasing a retirement village or land lease dwelling.