A retirement village is a community-style development offering independent accommodation to its residents and shared recreational facilities like pools, libraries and meeting rooms. Social events, craft and leisure activities may also be provided.
Some villages may arrange for visiting health professionals and have staff with a health background, however a retirement village is not an aged care facility or nursing home. Entry into a retirement village does not result in a subsequent entitlement to aged care services – this is regulated and assessed under Commonwealth laws.
Retirement villages are operated by private enterprises or community and charity organisations, with the quality of accommodation and level of services varying between villages.
When considering retirement village living, you should ensure your needs will be catered for and that you are clear about the type of arrangement you are entering. Our property team will explain your rights and responsibilities under a proposed retirement village arrangement and assist you in making an informed decision.
Retirement village arrangements
The decision to ‘buy’ into a retirement village should be considered as a lifestyle choice and not an investment. The legal relationship between the village operator and resident is determined by contract documents which should be carefully explained to you by an experienced lawyer.
Some arrangements provide for the outright purchase of a strata or community-titled property however many comprise a loan-licence or leasing arrangement.
A loan-licence arrangement requires payment of an up-front contribution and ongoing fees. The resident occupies but does not own the premises. When leaving, the resident may need to pay an exit fee, which can be substantial.
A leasehold arrangement requires the resident to pay ongoing fees which are usually set at a market rate. Other contributions and outgoings are also payable which vary between villages depending on the level of accommodation and services provided.
With either arrangement, the contract should contain clear terms regarding the resident’s right to occupy the premises, the permitted use of common facilities and any additional services like assisted living or aged care. The fee structure, ongoing contributions towards management and maintenance, and exit provisions should be understood.
Community developments that meet the definition of a ‘retirement village’ are covered by the Retirement Villages Act 1986 (Vic) which governs the relationship between operators and residents and sets out the requirements of operators.
A retirement village is defined as a community where:
- Most residents are 55 years or older or retired from full-time employment (or spouses/partners of those people);
- Residents receive accommodation and services, but not of the type provided in a residential or aged care facility; and
- At least one of the residents, as a condition of entering the retirement village, paid an ingoing contribution either by a lump sum or by instalments.
Operators have several pre-contractual disclosure obligations and must provide potential residents with documentation sufficient for them to make an informed decision. Potential residents should be able to compare villages and services and understand the financial obligations under the proposed contract. Operators must also allow interested persons to inspect documents such as past financial records, by-laws, and the village layout.
Points to remember
If you are considering retirement living, we recommend that you:
- Make enquiries and shop around for a village that offers the accommodation and services you need given your age, health status and interests.
- Obtain all mandatory documents from the village operator before signing a contract, such as the information fact sheet and disclosure statement and have these reviewed by an experienced property lawyer.
- Understand your financial commitment under the contract including initial contributions, ongoing payments and fees and exit fees. We recommend you speak with your financial advisor to assist with this aspect.
- Inspect the facilities and services on offer – they should be sufficient for your needs but not excessive – you don’t want to be paying for the upkeep of golf courses and tennis courts if you do not enjoy these activities.
- Read the by-laws and rules carefully so you understand what is expected of the residents and if there are restrictions such as the keeping of pets, visiting times and car parking.
- Ask other residents about the village you are considering and discuss your decision with your family members.
We understand that entering into a retirement village contract is an important financial and lifestyle choice. It is our objective to ensure you make an informed decision at this important transitionary time of your life.