Is a Freehold retirement unit REALLY the best option?

There are many ways that a retiree can own or occupy a retirement village unit, yet most people seem to think that a Freehold unit is the best option.

But is it really?

Most retirement village units in Australia are sold under the Loan/Lease or Loan/Licence occupancy model, where the actual title remains with the retirement village operator and a resident occupies the unit under a lease or licence. The resident pays a deferred fee when they exit and may or may not have access to the capital gains (if any). Under a freehold model, the resident owns the freehold title to their unit, NOT the village operator. But as I will argue, this does not necessarily work in the best interests of the resident.

Stamp Duty

When you buy a freehold unit you have to pay stamp duty, whereas you dont pay stamp duty on Loan/Lease or Loan/Licence contracts.


Typically under a Loan/Lease or Loan/Licence contract the village operator is responsible for any maintenance or repairs on your unit (this does vary depending on the contract), whereas under a Freehold unit you are responsible for the internal fittings and fixtures and the body corporate (you and the other residents) are responsible for the roof, walls, grounds, common areas, etc. The practical ramifications of this is that over time, residents (the body corporate) vote to keep the monthly levies low and as such, do not have the fund available to properly maintain the village.


When you leave the village under any kind of contract there is typically an obligation for the outgoing resident to refurbish their unit back to a marketable condition. In Freehold villages the resident pays for all of the refurbishment work. Under Loan/Lease or Loan/Licence contracts the operator may pay for all or a portion of the work. The practical ramifications of this is that exiting residents or their estates will rarely pay for a refurbishment. This means that over time the units become more and more dilapidated.

A scheme operator in most cases will always spend more on the upkeep and refurbishment of a village than a group of residents, simply because they are more heavily invested in the village and have more funds available to spend.

When looking for your retirement home I would encourage you not to be obsessed with the form of the title, but rather with the location of the village (as appropriate for you needs) and the key terms and conditions of your contract. As always, make sure you get good advice as this is a very specialist area.