Lifestyle communities or otherwise known as residential parks are gaining popularity for those who wish to downsize, live in a lower maintenance environment, or access equity to be able to travel. Residential parks operate under a land lease model, whereby homeowners own the home they live in, but while leasing the land instead. Whilst it seems an attractive business model to some, questions have been raised lately regarding the fees of these parks and the potential to target vulnerable people in our communities. In this article, we discuss the difference between retirement villages and lifestyle communities, disclosure obligations required by park operators, and the key terms to consider when considering whether a lifestyle community is financially practical for your circumstances.
What is the difference between a retirement village and a lifestyle community?
There is a common misconception that the terms retirement village and lifestyle communities are interchangeable. However, there are key differences between these two.
Retirement villages in Western Australia provide accommodation, amenities and services to people over age 55.
Typically, the entry into a retirement village requires:
- signing a residential tenancy agreement, or some other lease or licence;
- buying shares in the ownership of the village;
- “buying” a unit, subject to the administering body having the right or option to repurchase the unit; or
- “buying” the unit, where there are restrictions about the sale of the unit.
Under a retirement village model, residents often only have a licensed right to occupy a home and do not own it.
Lifestyle communities instead offer a business model which allows a person to purchase a transportable home or demountable dwelling and lease the land upon which the home sits.
There are two types of tenancies offered in lifestyle communities being ‘long-stay’ sites which can be occupied for more than three months and ‘short-stay’ sites for stays of less than three months.
Disclosure
In 2022, there were significant changes made to both the Residential Parks (Long-stay Tenants) Act 2006 and the Residential Parks (Long-stay Tenants) Regulations 2007 to improve the security of long-stay tenancy agreements and to promote fair and transparent arrangements between park operators and tenants.
Park operators (of lifestyle communities) are required to provide long-stay tenants with the following disclosure documents at least 5 working days before the signing of any contract:
- a copy of the proposed agreement, whether for a fixed or periodic term for on-site home or site only arrangement;
- a disclosure statement;
- a copy of the information booklet on park living;
- a copy of any park rules that apply to the residential park;
- a property condition report for the condition of the relocatable home and/or the rented site;
- a written schedule showing the amounts and types of fees and charges that apply; and
- information on how any exit fee or voluntary sharing arrangement operates.
Terms to consider prior to entering any arrangement
Prior to entering into any arrangement that could have a significant financial impact, we suggest seeking legal advice.
However, as a minimum, clauses that a person should be reviewing and looking for in a potential lifestyle community contract include (but are not limited to):
- What are the prices for rent and how do they increase each year?
- What costs are not included in the rent and may be charged additionally?
- What services and amenities are included in the rent?
- Are there maintenance and service fees?
- Is there departure, exit or deferred management fees?
- Is sub-letting or assignment allowed?
- How often will any additional fees increase?
- How does the agreement end?
Comment
Lifestyle communities can be an excellent choice for people, however prior to entering into any contract, a person should consider whether such an arrangement is financially viable or appropriate for their circumstances.
Our team of commercial lawyers regularly assist people wishing to make the transition, but do so with peace of mind they completely understand the contracts they are entering and the potential ramifications of them.
If you or someone you know is making enquiries to enter a lifestyle community and requires assistance, please do not hesitate to contact our office.
About the Authors: This article has been co-authored by Chanelle Kane and Steven Brown. Chanelle has been in the industry since 2013 and graduated with a Bachelor of Laws in 2020. Chanelle completed the Graduate Diploma of Legal Practice with the College of Law in 2020 and was awarded the 2020 PLT Professional Excellence Award for the cohort. Chanelle was admitted to practice in the Supreme Court of Western Australia in November 2020 and to the High Court of Australia in January 2021. Steven is a Perth lawyer and director, and has over 20 years’ experience in legal practice and practices in commercial law, dispute resolution and estate planning.
