Loss of Capital in Retirement Villages

The Melbourne Age reports in an article regarding a class action against prominent retirement village operator Aveo:-

"Professor Murray Gillin is one of 200 retirees who have signed up for the Levitt Robinson claim.

Professor Gillin, who lectured in entrepreneurship and innovation at Swinburne University, told Fairfax Media his decision to sell his townhouse and move into a retirement village at Sackville Grange in Melbourne's blue ribbon suburb of Kew, ultimately cost him hundreds of thousands of dollars in exit fees, foregone capital gains and other fees including maintenance fees.

He bought the freehold property in March 2010 for $850,000 and walked away after six years with $669,076, after the various fees were deducted."

This experience is highlighted in the chart below showing 4 different paths a retiree can take 1. Retain or obtain ownership of residential accommodation, 2. Rent residential accommodation, 3. Lease/licence residential accommodation in a retirement village with 100% capital gain but with the deferred management fee calculated on the exit price, 4.  Lease/licence residential accommodation in a retirement village with 0% capital gain but with the deferred management fee calculated on the entry price.