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A key thing to understand is that leasing a retirement village unit is about lifestyle, not investment
Top 3 messages about retirement village living:
It’s a lifestyle decision, not an investment one ‒ you may not make money from it.
There is no standard retirement village model or contract; they can vary from state to state and village to village.
Understand your contract, ongoing costs and exit fees – and make sure your family understands them.
Retirement villages offer an alternative housing option to Australians aged over 55. There’s a lot of talk about independent living in a retirement village: how to choose one, what it’s like and how much it really costs. With contracts varying from state to state and village to village, it can be difficult to understand how retirement villages work in Australia.
Compass spoke with Roger Pallant, president of the NSW Retirement Village Residents Association (RVRA), in an online question-and-answer session to clear up some of the biggest questions about how retirement villages in Australia operate. Here’s what he shared.
The retirement village market
The retirement village market keeps changing, Roger explained. Government measures to help people age at home, driven by pressure on aged care facilities, are reshaping how villages operate.
A key thing to understand is that leasing a retirement village unit is about lifestyle, not investment. You may make money in the long term, or you may not, depending on your contract. But it’s an option that offers particular features.
‘When you buy into a village, you’re going into a village that provides safety and security,’ said Roger. ‘You’re surrounded by likeminded people, [and] you have access to a whole heap of facilities at your doorstep.’
Understanding your contract
Due to the market changes, contracts vary widely. You might even find different contracts in place within one village, since new operators must honour existing contracts but can introduce new ones.
‘The issue that comes up most,’ Roger said, ‘[is that residents] have failed to understand what they’ve signed for … or the children don’t understand what Mum and Dad have signed for. So this is the most important part of the process.’
Roger’s advice:
Before you get the contract, you should receive a disclosure document that summarises key details like entry fee, exit fee and ongoing fees. So there shouldn’t be any surprises when you see the contract itself.
The contract adds more details, like village rules.
Read the contract and get legal advice to make sure you understand it.
A specialised retirement village lawyer is ideal, but legal aid and community legal centres can also help.
It’s easy to forget the details, so review the contract as the years go by.
Tell your family what’s in your contract, as they may be the ones managing your exit from the contract.
Living in a retirement village
Things to understand include ongoing costs, changing your unit, and what may happen if independent living stops being right for you.
After the upfront lease payment, you’ll pay a contribution towards running the village (often called a maintenance or service fee). The amount, and how often it can vary, will be set out in your contract.
The contract will also tell you whether you can make any changes to your unit and whether approval is needed first.
Living in a retirement village doesn’t guarantee you a place in an attached aged care facility, Roger explained, because retirement villages come under state law while aged care is a federal matter.
If a resident’s care needs increase and independent living is no longer appropriate, it’s usually up to their family, not the village management, to help them find alternatives.
Dispute resolution in retirement villages
Every village operator must have a dispute resolution process, although it can be easier on paper than in practice. Mediation between the resident and management is an option, but disagreement over who pays often stops it going ahead. In Roger’s experience, most disputes arise between residents, not between residents and management.
Residents’ committees can help prevent disputes, and Roger recommends committee members get training to help them play a constructive role. RVRA and other organisations offer committee membership training.
Exit fees, capital gains and selling your unit
Exit (or ‘deferred management’) fees keep the upfront price lower. They’re also operators are paid, since ongoing fees go entirely to running the village. New no-exit-fee models are emerging, but your upfront cost will be higher.
Capital gains treatment also varies from contract to contract. Some split gains 50/50 between resident and operator, while others give capital gains completely to one or the other.
Selling your unit may involve refurbishment or repair costs, and responsibility for paying them varies from state to state. You (or your family) will probably meet with management to agree on what’s normal wear and tear and what’s damage.
You (or your estate) will keep paying the fees until the unit is sold, and the contract sets the terms. Retirement unit sales can sometimes take up to 18 months.
The big picture of retirement village living
Roger’s overall message is that this is a highly variable slice of the housing market, with different state-based laws, changing market conditions and competing expectations.
Understanding your contract (and making sure your family does, too) is the best thing you can do to safeguard your peace of mind, independence and money.
Find out more
If you’re wondering whether buying into a retirement village is a good idea for you, check out these resources:
Tips for deciding about retirement village living – Compass article
Factors to consider before moving into a retirement village – RVRA video
Costs of entering a retirement village ‒ RVRA video
Understanding ongoing costs in a retirement village – RVRA video
Costs associated with leaving a retirement village ‒ RVRA video
Understanding your retirement village contract – RVRA video
Where to get more advice about retirement villages
Contact the Housing for the Aged Action Group (HAAG)
Association of Residents of Queensland Retirement Villages Inc (ARQRV)
Tasmanian Association for Residents of Retirement Villages Inc
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Compass
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