No doubt about it, planning for your retirement today has left more people out in the cold and feeling alone in this economic market. With more uncertainty growing around how to invest for retirement, we wanted to share this must-read investigative report identifying the rort happening in the License-to-occupy Retirement Village, and the fees that are applicable to both New Zealand and Australian Retirement Village contracts.
Alan Kohler, an authoritative ABC News finance presenter, once exposed the truth behind how the Retirement Village business model works. Kohler, states “The industry is a booming national disgrace, with three very juicy rackets: deferred fees, ongoing fees that keep going when you die, and bonds.”
Retirement Villages Fees “How they got away with charging both is beyond me….the genius who thought of it”
Kohler addresses deferred fees, explaining that “deferred fees are where you buy a unit in a retirement village at full price, but when the time comes to sell you have to pay the village owner a large percentage of what you get. One village that I’m familiar with requires 25 percent of the original purchase price to be paid to the owner, plus 75 percent of any capital gain. Others simply take 30 percent of the sale price – 3 percent a year for a maximum of 10 years.”
These deferred fees schemes are written into contracts and rely on people not considering what happens to their asset at the end.
“They usually don’t get legal advice and don’t really understand that the village owner, typically a property development company, will get a “deferred fee” of more than $100,000 when it’s time to move on to the next phase of life, or death.”
On top of that owners usually, insist on acting as an agent during the sale of the property taking a commission based fee.
Kohler goes on to talk about non-deferred fees “ongoing management fees, usually $100 and $200 a week, but sometimes more” and highlights the discrepancy with this fee type.
“The weekly/monthly management fees are meant to cover the maintenance of the village and the amenities; the deferred fees are meant to cover, err, the maintenance of the village and the amenities.”
The thing to consider with these management fees is that they tend to continue until the unit is sold, regardless of whether the unit is empty.
Kohler then addresses the bond fee. “If the next stop is an aged care hostel, there is a bond to be paid – usually somewhere between $300,000 and $500,000. The beauty of the bond racket is that there are no restrictions on what the hostel owner may do with the money, and when it is repaid not only is there no interest, it is minus a fee of a few thousand dollars.”
Barton Fields Lifestyle Village, building freehold retirement homes that you own
Educating yourself to know the differences between Retirement Villages and Freehold Lifestyle Villages is crucial. A retirement plan based on building assets rather than spending savings is the first step to living the lifestyle you deserve.
Freehold titles are the best alternative to existing models, inherently superior to Licence to Occupy arrangements or Life Interests.
The main practical advantages are that purchases of Barton Fields Villas:
- Avoid the financial penalties that are attached to the usual retirement village offerings under the “license to occupy” or “deferred management fee” options available in other retirement villages in Canterbury
- May borrow against their title if they choose to,
- May pass title on to descendants or family trusts, and
- Remain fully entitled to any capital gains made upon sale.
- In addition to your freehold title you also share in the ownership of Barton Lodge
10% deposit is required to secure the build, nothing more until completion. Depending on your financial arrangements, this would take the form of equity in your home.
Each year, the Barton Fields Residents Committee will work with the Body Corporate Manager to compile a budget for the operational costs of running and maintaining the village. This is divided by the number of villas, and a weekly fee per villa is derived. The only other additional costs would be individual villa utilities, telephone, and rates.
Get the full list Barton Field Villas frequently asked questions Retirement villages versus Freehold lifestyle Village to learn more about the benefits of Freehold Lifestyle Villas.
To speak with a sales agent contact Barton Field Villas to discuss your freehold lifestyle villa.
Full article – Alan Kohler Retirement Village rorts: The booming scandal.
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Photo By Hector Alejandro