Many Over 50s consider residential land lease communities as a viable option when looking for living alternatives in their mature years. We take a look at the main benefits of land lease arrangements.
Land lease communities in NSW are governed by the Residential (Land Lease) Communities Act 2013. If you buy a home within a land lease community, you own the home but lease the land on which the home sits, from the Community Operator. There are several advantages to this approach in comparison to retirement villages or the outright purchase of both the land and the building. The two main advantages are a lower upfront cost and the absence of exit fees (and other extraordinary costs) upon sale.
Hometown Australia’s entrance into the market is considered a timely response to the strong demand from Over 50s for residential land lease communities. A subsidiary of the well-respected Hometown America which has been operating quality land lease communities in the US for over two decades, with 60 Communities and over 25,000 home sites. The Australian operation is run by Kevin Tucker and Stuart Strong and currently owns and operates six land lease communities in NSW and QLD, with several more in the pipeline. Kevin explains that there are investment savings both at the beginning and end of home ownership, “Homeowners purchase their home and enter into a secure site agreement for the land. This means their initial investment is affordable and there is no stamp duty on the purchase price.”
When it comes time to move on, “There are no exit fees and the Homeowner (or their families) retain any capital gains from the eventual resale of their property. The land lease model gives more flexibility and financial stability than many other types of retirement living.”
In respect of capital gains, it is important for Homeowners to keep in mind that well maintained (or renovated) homes retain more value over time. In a land lease community, whilst Homeowners will enjoy benefits from rising real estate values, much of their profit will come from maintaining the value of the home itself.
Homeowners enter into a Residential Site Agreement, and generally pay site rental fees to the Community Owner / Operator on a bi-weekly basis. Homeowners that qualify for Commonwealth Rent Assistance may be entitled to government assistance for these site rental fees. This is another attractive feature of land lease communities that is not available in other retirement living options.
The factors that Kevin has outlined can result in significant savings, both in the short and longer term. This is important for many Over 50s who are looking at accommodation alternatives as part of a downsizing strategy. The fundamental concept that is driving the success and popularity of the land lease industry is the ability to release equity tied up in a large family home. An Over 50 that has owned their family home for many years, and has enjoyed strong capital growth during that time, can generally sell their home for much more than the home purchase price in a land lease community. As a result, an over 50 can release much needed finances to support their retirement. However, this age group is not looking to ‘downgrade’ in any way just because they ‘downsize’. They want top quality design features and amenities that are specifically catering for the over 50 age group both now and as their needs change in the future.
The lower cost of land lease arrangements compared to buying both the land and the building means that people can afford to live in premier locations such as waterfront, coastal or prime urban communities with easy access to the services and facilities they would have become accustomed to whilst in the family home. The financial model also allows Homeowners to better afford innovative home designs and amenities within a resort style community.
Kevin confirms this in describing Hometown’s new Port Stephens development, “We are about to begin construction on a new development in Port Stephens called Sunrise Lifestyle Resort. This community will have luxury homes and five-star resort like community amenities. These stunning freestanding, single level architecturally designed homes will be mobility and eco-friendly. In addition, the community facilities will include an expansive clubhouse, indoor and outdoor pools, a gym and separate exercise areas, a theatre / media room, tennis court, lawn bowls, sports bar and much more. And for our travellers … caravan and RV storage. Sunrise Lifestyle Resort will offer true resort living in a stunning coastal location”
How about the intangibles that people look for in their mature years? Many Homeowners say that one of the true benefits of living in a resort community is the sense of “community” and easy proximity of like-minded people. According to Stuart Strong, “This sense of community is something that an operator and homeowners build together”.
“We encourage our Homeowners to become actively involved in the community, but it is up to the individual to join in as much or as little as they would like. We supply the canvas and tools for our Homeowners to build their dream lifestyle. Our communities provide an environment and facility where our residents want to live, not have to live. The communities offer a varied range of activities, from arts and crafts through to tennis and a myriad of other sporting and recreational pursuits. Residential land lease communities have evolved and now deliver high quality facilities often surpassing traditional retirement village developments. Our homeowners expect a superior level of amenity and we will continue to update our communities to be in touch with the lifestyle they desire.”
Whilst we have described some of the benefits of the land lease model, it is important to keep in mind that these communities are primarily independent living and seldom provide support services, such as medical and allied care, that some retirement villages may. However, residents can always avail themselves of the same services as they would if they resided in the general community. Most of our Homeowners will not require high level ongoing care so paying for these extras, over many years, may not make sense. Homeowners should weight up what their retirement priorities are and choose the option most suitable for their needs.
Of course, it would be fanciful to believe that everything will always go to plan and expectations, 100 percent of the time. We asked Stuart what kinds of processes should be in place for handling issues that homeowners may not be happy with.
“Our community managers are approachable and homeowners can always speak to someone if they have a problem. We have multiple forms of communication between homeowners and managers allowing for any issue to be resolved in a timely fashion. We encourage our homeowners to have a Resident’s Committee who can present and discuss any issues with management. We also arrange guest speakers from resident advocacy groups to come along to our communities and speak openly with our homeowners, discuss their rights and any concerns they may have.”
Land lease communities are definitely an attractive alternative that can supply luxury independent living in a safe and secure community environment. Land lease communities can be an affordable and appealing option allowing homeowners more freedom in their life choices now and in the future.
Australian Over 50s Living & Lifestyle Guide