In this model, a resident buys shares in a company that owns the Retirement Village. Shares are issued in accordance with the Company's articles of association and carry with them a right to occupy a certain unit in the Village and the use and enjoyment of common areas and facilities.
In common with the Unit Trust structure, the provision of a company title involves a complex legal structure and one that normally should be avoided in the absence of very complete legal advice regarding the company and particularly with respect to:
- the company's articles of association
- comprehensive information regarding the finances, ownership, control and management of the company, including the board of directors and how they are appointed
- the existence and contents of any long term management contract that may have been concluded with the operators of the Village.
In any event, it is now rare for Retirement Villages to be structured on this basis; community and company title schemes reportedly apply to less than 2% of villages, and these are probably older villages.
Financial: Entry and Exit
Residents purchase accommodation through the purchase of shares. If they are purchasing an existing unit the price is paid directly to the existing owners of the unit at settlement; less any departure fees. If the unit is new and new shares have been issued by the company, then the price is paid directly to the Trustee. You will normally have to pay stamp duty if your tenure is freehold, strata, community or company title.
We address Exit and Departures fees in more detail elsewhere, andnote that you will not see any funds returned to after vacating a unit until it is sold and settlement concluded.
The same costs applies as with Lease and License accommodation, including management fees, but also for legal and other compliance costs associated with maintaining and administering the corporate structure.