Loan-licence vs leasehold vs strata: village contract types in Australia

Loan-licence vs leasehold vs strata: village contract types in Australia

The contract structure is the single most important commercial fact about a retirement village. It determines what you legally own, what you get back on exit, and what tax and pension treatment applies.

Loan-licence

You loan the operator a sum of money (the "ingoing contribution") and receive a licence to occupy a specific unit. You are not on title.

• Most common structure in traditional NSW and VIC retirement villages.
• No stamp duty payable on entry.
• Operator keeps the capital gain on resale (in most contracts).
• Refund is the original loan amount, minus DMF, refurbishment, and other contractual deductions.
• Resale is operator-controlled — they market the unit and approve the next resident.
• State legislation sets a maximum time the operator can hold the refund before paying it out (e.g. 6 months in NSW under the Retirement Villages Act 1999, varying by state).

Leasehold (long-term lease, registered on title)

You hold a long lease (often 99 years) over a specific unit. The lease is registered on title.

• Common in QLD and parts of WA.
• Stamp duty treatment varies by state (often concessional or nil for retirement leases).
• Capital gain treatment is contract-specific — sometimes shared, sometimes operator-only.
• Resale is usually operator-managed, with the lease re-issued to the next resident.
• The lease itself is technically transferable subject to operator consent.

Strata or community title

You own a freehold lot, the same as in a regular strata apartment building. The Certificate of Title is in your name.

• Less common in traditional retirement villages, standard in over-55s lifestyle communities and some premium villages.
• Stamp duty payable on purchase.
• You keep 100% of the capital gain.
• Resale is on the open market, though the village may impose a right of first refusal, age restrictions, and (in some contracts) a DMF clause regardless of the strata structure.
• Body corporate fees apply on top of any village service fee.

How to identify which one you are signing

The Disclosure Statement (or equivalent state document) is required to identify the structure. Look for:

• "Loan-licence" or "Loan and Licence" — loan-licence.
• "Lease for X years" or "Leasehold" with a number of years — leasehold.
• "Strata title" or "Community title" + a lot number on a registered plan — strata.

If you cannot tell from the document, your solicitor will. Do not rely on the sales agent's summary.