‘What’s the difference between a land-lease community and strata title?’

Nov 15, 2020
Downsizing expert Rachel Lane says the two options are like apples and oranges. Source: Getty.

Q: How does the land-lease model used at lifestyle communities compare with strata title, which is more common in apartment buildings? 

A: You are really talking about an apple and an orange in this comparison.

Ultimately, if you are trying to decide between these two options for owning property, doing the exercise on Rights, Responsibilities and Costs on page 26 of Starts at 60’s free Downsizing Essentials e-guide is probably a good starting point (it’s a simplified version of a similar exercise in Downsizing Made Simple, the book I co-authored with Noel Whittaker – you can buy our book at a discount if you’re a member of Starts at 60!).

When it comes to costs, one of the big expenses of moving into a strata title development can be stamp duty. In a land-lease community, because you are buying the home and leasing the land, there is no stamp duty. In a strata development there will be an owners’ corporation (or what people often call a body corporate) that’s responsible for the ongoing care and maintenance of the buildings, communal areas and relevant insurances.

As an owner, you must be part of the owners’ corporation, which will levy all of the owners in the building a regular fee to meet the ongoing expenses. This fee may include a payment to an independent person who acts as the manager to ensure compliance with all of the requirements. If there are structural issues with the building or common areas, as we’ve seen reported in the news, then that is an issue for the owners’ corporation both in dealing with the builder to get any repairs carried out but also in meeting the costs – often through a special levy.

In a land-lease community, the owner/operator (for example, Ingenia Lifestyle) is responsible for maintaining the communal areas, while the residents are responsible for maintaining their homes.

The operator will charge a ‘site fee’ to the residents, typically monthly, for leasing the land and maintaining the facilities. There is often a residents’ committee that you can join to inform of the operator of any issues and provide suggestions on how fund should be spent.

Unlike a body corporate, though, the site fees are not a cost recovery model, which means that the operator can (and usually does) profit from these fees. But the fact that land-lease community residents can claim Rent Assistance, while residents in a strata title property can’t, means that the fees are likely to be more affordable. You can read more about Rent Assistance and land-lease communities in the Downsizing Essentials e-guide I mentioned above.

Another thing to think about is whether you need a property that you can potentially borrow against in the future. The fact that you have title in a strata development will make it easier and potentially cheaper to borrow.

The last thing to think about is who your neighbours will be.

In a strata development, you may have young families with small children or university students who like to party all weekend. And properties may be available on short-term leases with a constantly changing parade of neighbours, which means any bad behaviour can be difficult to control short of calling the police!

In a land-lease community the operator normally sets a minimum age, typically 55, that residents must meet to live in the community. Operators will also normally restrict any short-term leasing. So you’re much more likely to find a close-knit community of people with similar interests and life experience … though that doesn’t mean there are no parties!

In my experience, land-lease communities are vibrant, with everything from yoga to happy hours and everything in between. But in the main, the strong sense of community (often combined with an onsite village manager) makes sure that everyone gets to enjoy it.

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.

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