Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 87

Retirement communities come in different shapes and sizes

Last month, we looked at granny flat rights and examined the different legal and financial arrangements that people enter into when the need for aged care arises. This article examines retirement communities – retirement villages (RVs) and demountable home parks (DHPs).

Demountable home parks (also known as manufactured home parks)

DHPs are generally classified into two groups: those that originated from caravan parks for tourist accommodation and also offer permanent sites (often in a distinct area) and those that are purpose-built villages or communities marketed to retirees. While they operate under Caravan Park and Demountable Home Park legislation, they are often called things like ‘Over 55’s Community’, ‘Retirement Resort’ or ‘Lifestyle Village’.

DHPs built for the retiree market have the look and feel of a bricks and mortar retirement village with communal facilities such as swimming pools, bowling greens, tennis courts etc. They normally have bigger units, with the majority being two- or three-bedroom units and very few single-bedroom units. The units themselves can be hard to pick as demountable, particularly when there is a garden surrounding them and they come with all the ‘mod cons’.

The key difference between a DHP and a RV is that the loan, licence or lease arrangement is over the land, not the building. This poses a unique set of circumstances for people living in these communities making residents both a homeowner and a tenant at the same time. Traditionally, there have been no entry or exit fees, however, some of the new communities do charge an exit fee.

Commonwealth rent assistance and DHPs

Due to the nature of ownership within a DHP, i.e. you own the home but rent the land (often called ‘site fees’), rent assistance is often payable to residents of these communities who are pensioners.

Here’s how the rent assistance is calculated:

Firstly, the rent (site fees) must be above the minimum threshold for rent assistance to be payable. The minimum thresholds are: $113.20 per fortnight for singles and $184.20 for couples (different thresholds apply to couples separated due to illness or share arrangements). Rent assistance is paid at 75% of the rent above this threshold, up to the maximum of $127.60 per fortnight for singles and $120 for couples.

For example, Shirley is a full age pensioner living in an Over 55’s Community. She pays site fees of $120 per week to the community manager. Her rent assistance will be calculated as:

Rent paid $240 per fortnight (pfn)

minus threshold $113.20 pfn

excess $126.80

x 75% = $95.10

Shirley’s rent assistance would be $95.10 pfn. For Shirley to receive the maximum rent assistance of $127.60 pfn her rent would need to be at least $283 pfn.

One of the main concerns for residents of DHPs is increases in site fees (rent). The leases offered vary from one to the next and one resident to another. While the lease will indicate the rate at which the rent will be increased during the period of the lease (e.g. CPI) for those with shorter leases their expiry can bring uncertainty about the affordability of the new lease.

Retirement villages

RVs operate under the relevant state or territory legislation which typically sets a minimum age of 55. This legislation generally provides a definition of what is and isn’t considered to be an RV, sets out what legal documents (including disclosures) are required to be provided to residents by the village operator, regulates some (not all) financial arrangements and provides framework for the resolution of disputes.

There are many different forms of ownership with RVs, including freehold or strata title, company title, leasehold, licence and some operate under a rental model. The most common ownership model is a 99-year (or lifetime) leasehold or licence.

The costs associated with living in a RV can be summarised as: the entry cost, the ongoing cost and the exit cost.

1.  Entry cost – This is the price paid to gain possession of the unit. This will be either the purchase price if it is strata or company title, or the amount of the interest-free loan you make to the developer if it is a lease or licence arrangement. The amount you pay determines if Centrelink or the Department of Veteran Affairs consider you to be a homeowner, whether the amount is an assessable asset and your entitlement to rent assistance. Consideration also needs to be given to the impact on pension entitlement itself.

2.  Service charges – Irrespective of the method of title held, residents are responsible for the ongoing costs of the village. These include insurance, water rates, general lighting, staff wages, and repairs and maintenance. Of course residents are also responsible for the internal maintenance of their unit, their own utilities and insurance of their personal effects.

Many villages also require outgoing residents to pay the cost of refurbishment of the unit and this will be part of the calculation of the departure fee.

3.  Deferred management fee (DMF) – This is the cost that causes the most confusion. There are a number of different ways in which the DMF can be calculated, and in some cases the retirement village operator will give a choice of models. In looking at the models it is important to understand if the DMF will be calculated using the purchase price or the sale price and whether it will be before or after any capital gain sharing.

Availability of care services

The amount of care that can be provided in an RV or DHP will vary from one to another. Traditional retirement communities focus on the lifestyle and activities and want to attract residents that are sociable and physically active. These communities may require that you leave if your health deteriorates as too many people unable to participate or remaining in their units can have a detrimental effect on the experience of the other residents as well as the ability to sell units to new residents. In some circumstances the manager will allow you to have care provided to you in your unit. The manager may organise this for you or leave it up to you to arrange, just as you would in your own home.

At the other end of the scale there are retirement communities that are purpose-built to deliver care. Where it is a condition of entry that you require care the manager will generally assess your needs prior to you moving in to ensure that they can provide the services you need. They will generally co-ordinate the package of services for you and provide you with a price table to help you understand what the cost will be now and what you can expect if your care needs increase. In many cases the care being provided will be through a government-funded care package with the delivery of ‘top up’ services by staff or through private contractors.

Living in a retirement community can provide the company of like-minded people while having access to care and other services that maintain independence. Understanding the legal and financial aspects as well as the ability to have access to care if needed is vitally important.

RL cartoon 071114

RL cartoon 071114

Rachel Lane is the Principal of Aged Care Gurus and oversees a national network of financial advisers dedicated to providing quality advice to older Australians and their families. Read more about retirement villages and demountable home parks in the book “Aged Care, Who Cares; Where, How and How Much” by Rachel Lane and Noel Whittaker. This article is for general educational purposes and does not address anyone’s specific needs.


Leave a Comment:



Family home no longer the sacred cow

Providing financial assistance to parents

Don’t have retirement village regrets


Most viewed in recent weeks

10 little-known pension traps prove the value of advice

Most people entering retirement do not see a financial adviser, mainly due to cost. It's a major problem because there are small mistakes a retiree can make which are expensive and avoidable if a few tips were known.

Check eligibility for the Commonwealth Seniors Health Card

Eligibility for the Commonwealth Seniors Health Card has no asset test and a relatively high income test. It's worth checking eligibility and the benefits of qualifying to save on the cost of medications.

Hamish Douglass on why the movie hasn’t ended yet

The focus is on Magellan for its investment performance and departure of the CEO, but Douglass says the pandemic, inflation, rising rates and Middle East tensions have not played out. Vindication is always long term.

Start the year right with the 2022 Retiree Checklist

This is our annual checklist of what retirees need to be aware of in 2022. It is a long list of 25 items and not everything will apply to your situation. Run your eye over the benefits and entitlements.

At 98-years-old, Charlie Munger still delivers the one-liners

The Warren Buffett/Charlie Munger partnership is the stuff of legends, but even Charlie admits it is coming to an end ("I'm nearly dead"). He is one of the few people in investing prepared to say what he thinks.

Should I pay off the mortgage or top up my superannuation?

Depending on personal circumstances, it may be time to rethink the bias to paying down housing debt over wealth accumulation in super. Do the sums and ask these four questions to plan for your future.

Latest Updates

Investment strategies

Three ways index investing masks extra risk

There are thousands of different indexes, and they are not all diversified and broadly-based. Watch for concentration risk in sectors and companies, and know the underlying assets in case liquidity is needed.

Investment strategies

Will 2022 be the year for quality companies?

It is easy to feel like an investing genius over the last 10 years, with most asset classes making wonderful gains. But if there's a setback, companies like Reece, ARB, Cochlear, REA Group and CSL will recover best.


2022 outlook: buy a raincoat but don't put it on yet

In the 11th year of a bull market, near the end of the cycle, some type of correction is likely. Underneath is solid, healthy and underpinned by strong earnings growth, but there's less room for mistakes. 


Time to give up on gold?

In 2021, the gold price failed to sustain its strong rise since 2018, although it recovered after early losses. But where does gold sit in a world of inlfation, rising rates and a competitor like Bitcoin?

Investment strategies

Global leaders reveal surprises of 2021, challenges for 2022

In a sentence or two, global experts across many fields are asked to summarise the biggest surprise of 2021, and enduring challenges into 2022. It's a short and sweet view of the changes we are all facing.


2021 was a standout year for stockmarket listings

In 2021, sharemarket gains supported record levels of capital raisings and IPOs in Australia. The range of deals listed here shows the maturity of the local market in providing equity capital.  


Let 'er rip: how high can debt-to-GDP ratios soar?

Governments and investors have been complacent, even encouraged, the build up of debt, but somewhere, a ceiling exists. Are we near yet? Trouble is brewing, especially in the eurozone and emerging countries.



© 2022 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.