Land-lease communities explained: own the home, lease the land

A land-lease community is a group of homes, often for over-50s or retirees, where you own your home but not the land under it. The operator owns the land. You sign a site agreement with them, which is a lease that lets you keep your home on a site and use the shared facilities.

In Queensland, these are usually called residential parks, and the homes are called manufactured homes. In NSW, they’re called residential land lease communities. You may also see them marketed as lifestyle communities or over-55s communities.

The homes are often new, single level and modern. Many communities have a clubhouse, pool, bowling green or other shared spaces. Some feel like a quiet suburb. Others have a busy social calendar.

Because you’re not buying the land, the home usually costs less than a similar house in the same area. That can free up money from selling your house. The trade-off is that you pay site fees for as long as you live there.

The site fee, also called site rent, is your main ongoing cost. It usually covers use of the land, the shared facilities and upkeep of common areas. Your own electricity, water and home insurance are often extra, so check.

Site fees go up over time, and how they go up matters a great deal over 10 or 20 years. The law sets the rules, and they’re different in each state.

In Queensland, the law now caps general site rent increases at the higher of CPI (a measure of inflation) or 3.5% a year, and generally allows only one increase a year. Increases based on a “market review” are no longer allowed.

In NSW, a site agreement can set out a fixed method, such as CPI or a set percentage, or the operator can use a notice method. With a notice method, you must get at least 60 days’ written notice, and increases can happen no more than once in 12 months. Some increases can be challenged at the NSW Civil and Administrative Tribunal (NCAT).

Rent Assistance is an extra payment from the Australian Government for people who pay rent and get an eligible payment, such as the Age Pension. Services Australia lists site fees, and fees in an over-55s village or lifestyle park, as costs that can count.

To get it, your rent or fees must be above a minimum amount. If you’re eligible, it’s paid automatically with your regular payment once Services Australia has your accommodation details. You don’t need to make a separate claim.

This is one reason land lease appeals to some pensioners. Selling a house and buying a cheaper home can also change how your assets are assessed for the pension. The Financial Information Service at Services Australia is free and can explain how a move might affect you.

Most people think of land lease as having no exit fee, and many communities don’t charge one. But some contracts have included a fee or a share of the sale price when you leave. It’s important to know which kind you’re signing.

In NSW, these are called voluntary sharing arrangements. They might ask you to pay a share of any capital gain, which is the rise in your home’s value, or pay part of your site fees later. The law says the operator must also offer a standard “rent only” agreement with no sharing terms. A sharing arrangement can’t include a fixed exit fee, and it must contain signed declarations that you were offered the rent-only option.

In Queensland, check your site agreement and the park’s disclosure documents for any amounts payable when you sell. Ask the park owner in writing, and have your solicitor confirm the answer.

Because you own your home, you can sell it. In practice, most homes are sold where they sit, to a buyer who then signs a site agreement with the operator. Very few people move the home.

In NSW, you have the right to sell on site. You can choose your own agent, and the operator can’t make you use them. The operator must not unreasonably refuse or delay a site agreement with your buyer, or insist the buyer agrees to a sharing arrangement.

In Queensland, a park owner can only charge a selling fee if you’ve signed a selling authority and they actually sold the home, and that fee is capped. Queensland law also now includes an opt-in buyback scheme for some homes that are hard to sell. If you join and the home doesn’t sell, the park owner must cut the site rent by 25% after a period and then buy the home.

Even with these rules, homes can take time to sell, and site fees usually keep running until they do. Prices depend on the local market, the age of the home and the site fee a buyer will take on.

Land lease tends to suit people who are well, active and happy to look after themselves. It can suit couples or singles who want a smaller, newer home, a community around them and money freed up from selling a house.

There’s generally no care on site. You can usually get home care services delivered to your home, as you would in a house, but the operator isn’t there to provide it. If your health is changing, think about what happens in five or ten years.

It may not suit you if you want to leave a house to your children as land, if you’re worried about fees rising faster than your income, or if you need care now. Staying in your own home, or a retirement village with more support, may be a better fit.

• Good fit: active, healthy, want a newer and smaller home with company nearby
• Good fit: want to free up money and may qualify for Rent Assistance
• Think twice: need regular care now or soon
• Think twice: on a tight fixed income and worried about rising site fees
• Think twice: want to leave land or property value to family

In Queensland, the law is the Manufactured Homes (Residential Parks) Act 2003. The park owner must give you a Residential Park Comparison Document, a Home Owners Information Document and the proposed site agreement at least 21 days before you sign. After signing, you have a 7-day cooling-off period, or 28 days if you didn’t get all the documents on time.

In NSW, the law is the Residential (Land Lease) Communities Act 2013. You must have the disclosure statement for at least 14 days before signing a site agreement, and that can’t be waived. After signing, there’s a 14-day cooling-off period. The operator can’t charge you for the site agreement, a holding deposit or a rental bond.

Get advice from your own solicitor before you sign, ideally one who knows land lease agreements. In Queensland, Caxton Legal Centre’s free Queensland Retirement Village and Park Advice Service covers residential parks. In NSW, Seniors Rights Service can give free legal advice about land lease communities.

• How exactly can the site fee go up, and how often?
• What has the site fee done over the last five years?
• What does the site fee cover, and what do I pay separately?
• Is there any fee or share of the sale price when I sell?
• What are the community rules on pets, visitors and changes to my home?
• Are there plans to expand, redevelop or sell the community?
• How long do homes here usually take to sell?