Entering a retirement village is a common experience for many elderly Australians. The new living arrangement can be ideal for people who are no longer able to manage a large house and garden, allowing them to live in a community environment with ready access to living assistance and health care options. Signing a contract for living in a retirement village can be a daunting prospect for senior Australians, involving a substantial financial commitment. While there is state legislation which addresses the rights, duties and liabilities of the industry – in NSW, the Retirement Villages Act 1999 and in Victoria, the Retirement Villages Act 1986 – it is obviously the responsibility of the person entering the retirement village to ensure they are fully informed about the contract and what it entails.
Below we set out some of the questions you should ask before deciding on a retirement village.
What are the key things you need to ask?
Before signing a contract, you should do as much research as possible. See as many villages as possible in the area you wish to live and within your financial range.
Ask each for their standard factsheet which by law each village must provide on request. A well-drafted factsheet will hopefully answer many of your questions and you should never be reluctant to ask for more information. Some of the questions you might have are:
- Does the retirement village have a waiting list and if so, do you have to pay to be on it? Do you get your money back when you enter the retirement village or if a place does not become available within a certain time or if you change your mind?
- Is there a schedule of fees and charges included?
- What is the village policy on pets, visitors and car parking?
- Does the village have a bus? How close is the village to public transport, medical facilities, shopping facilities, entertainment?
- Are residents actively involved in decisions concerning the level of maintenance and services provided and their cost?
- Does the retirement village have a residents’ committee and if so, how are its members elected?
- What process does the village have for resolving disputes?
- What are the restrictions on your use of the retirement village facilities and your unit?
- What common areas – such as community room, swimming pool, barbecue area, etc. – are available? You will probably have to pay for maintenance of these as part of your ongoing fees, so check what you will be paying for.
- How much freedom do you have to change, modify or renovate the unit to suit your tastes or to add geriatric aids such as railings or ramps?
- If the operator claims that more village facilities are planned, is this claim reflected in their promotional material? Are there any conditions attached? When are they likely to be built?
- If capital investments are made to improve the village, will those costs be passed on to residents? Residents are responsible for maintenance costs only, not for the costs for capital improvements.
- Does the retirement village have an activities coordinator? If you choose not to participate in the activities, do you still have to pay part of the cost through ongoing fees?
- Does the retirement village provide support services if you need them, such as assistance with meals, cleaning and other personal services? Can the contract be adjusted to include these services, and at what cost?
- Are meals available and at what cost? Is there a common dining room? Can you bring your own meals to eat there? Can you invite guests?
- Is there aged care accommodation in the area if you need it in the future?
- Are new units being built now or planned for the future? This might affect the resale value of your unit.
Some of these questions might also be answered by talking to other residents about what they do and don’t like about the village. Ask family and friends for their opinion if and when they accompany you while you do your due diligence.
Types of occupancy
The most common ways to enter into a retirement village, covered by a contract, are:
Leasehold: You will buy your unit and lease the land it is on. In addition to your lease you often enter into a service agreement that sets out what the village operators will provide and how much they will charge you.
Right of occupancy: You buy the ‘right’ to live in your unit and, as with leasehold, also sign a service agreement.
Freehold: You buy your unit (or villa, or townhouse) and the land it is on outright.
Strata: You buy your unit and also own a share in common property (such as pathways, pools, etc.).
Rental: You rent a unit within the complex, though this is not a common practice in private retirement villages.
Before you sign the contract
Retirement village contracts are not the same as ordinary residential property contracts. Once you have a contract for entry into a retirement village, the smartest thing you can do is have a legal practitioner experienced in such contracts look it over and explain its legal implications to you.
Be sure the terms of the contract reflect any verbal assurances you have received. Under Victorian Law you must be given the contract, and disclosure statement, at least 21 days before you sign them (14 days in NSW). There is also a right to ‘cool-off’ at any time within 10 business days (7 days in NSW) of signing a residence contract.
The disclosure statement should summarise the key information covered by the residence contract, including all fees and charges, how the operator uses those fees and charges, any utilities, services or facilities provided by the operator, and how the resident’s exit entitlement is calculated and paid.
The contract itself should cover all of the following: details about the residence being occupied; the operator’s name and contact details; the right to cool-off; the right to occupy the residence; recurrent charges which you will be liable for; additional services and facilities available to residents of the retirement village and the costs associated with those services and facilities; the right to terminate and receive an exit entitlement; the operator’s dispute resolution policy; and details regarding who will be responsible for repairing or replacing the fixtures, fittings and furnishings in the residence.
Exiting the village
It’s also wise to check before signing the contract what happens if you decide to leave the retirement village or you die.
What are the departure or exit fees? Some villages refers to this as a Deferred Management Fee and will load the fee in the first few years of your residency. Other villages’ exit fee will increase gradually over time. Check with a legal professional as to how this fee is structured.
If you decide to sell your unit, some contracts will require you to refurbish it before doing so. Does this only refer to items that need to be repaired, or is it more extensive (such as new carpet)? Are there any other restrictions on selling the unit? Can you engage your own real estate agent to sell it? Some contracts will only allow the operators to sell your unit. It may also stipulate that you must continue paying all ongoing fees until a buyer is found. If the operator is selling the unit, this may mean securing a sale of your unit is not a high priority for them.
Guiding senior clients through the ins and outs of retirement village contracts is a specialty of Harris Lieberman (Wodonga Estate Planning Lawyers). Call our office on (02) 6051 5100 today to arrange a consultation about how we can help you avoid the pitfalls and find the right place for you to live in your later years.