Retirement Village Contracts

Retirement Village Contracts are very different to the Contracts people are used to dealing with during their lives when they have bought and sold houses.

The fundamental difference is that the rights created with Retirement Village Contracts are not the same as ownership of land, and the monies payable at the start, and at the end, are very different from the normal buy / sell proposition people have experienced throughout their lives.

The terms of Retirement Home and Village contracts are complex, and people need to be professionally advised by specialist retirement village conveyancers as to what they are entitled, or not entitled to do, whilst occupying the property. In many respects the rights are more akin to being a tenant for an indefinite period, rather than an owner.

These contracts have long-term financial consequences in that they normally involve substantial exit charges when the person leaves the Retirement Village. The trade off is essentially this – the cost going in is lower, but the cost going out is much higher. That way people can afford to go into a Retirement Home or Village because the entry price is reduced to more affordable levels, but they pay extra on the way out.

We offer Fixed Fee Pricing for our Retirement Village Conveyancing. For details of our pricing click here.

Retirement Village Contracts

Retirement Village Contracts aren’t the usual buy/sell contracts people have been used to during their lives.

Our video summarises the different Retirement Village Models and the recent changes to the Law.

The February 2019 Changes

This regime is designed to provide greater certainty and clarity for prospective Retirement Village Purchasers.

In essence there are two parts to any Retirement Village Contract:

  1. The Compulsory Section under the Retirement Village Act;
  2. The Individual Contract for the particular Retirement Village.

The Compulsory Section under the Act has two main parts:

  1. The Village Comparison Document;
  2. The Prospective Costs Document.

Each Village is required to complete the standard clauses in the Compulsory Section with their individual information.

Each Village has clauses and conditions specific to them.  These vary from contract to contract and need to be reviewed and advised on individually.

Both the Village Comparison Document, and the Prospective Costs Document are supposed to be provided at least 21 days prior to signing any contract, though that period can be waived by the purchaser in certain cases.

Under the Retirement Village Act there is a 14 day cooling off period after signing a contract (though some operators, such as Aveo, offer an additional 7 days cooling off).

See our blog on the February 2019 changes.

The November 2019 Changes

The November 2019 changes are directed primarily at Retirement Village operators and are designed to ensure clarity and accountability in relation to certain financial aspects of running a Retirement Village.

See our Blog about the November 2019 changes

The Retirement Village Landscape is constantly changing

Retirement Villages are increasingly the lifestyle choice that elder people are opting for, and the industry has in past years been subject to criticism in relation to disclosure and understanding by purchasers.  The regime that has been rolled out in 2019, and which is continuing, is designed to ensure that prospective purchasers, and the residents of Retirement Villages, are provided with extensive disclosure and better understanding of their rights and obligations.

As specified in the Village Comparison Document itself a purchaser should

“Seek independent legal advice about the retirement village contract – there are different types of contracts, and they can be complex.”

Exit Costs and What happens next are Important Considerations

The single greatest area of misunderstanding, and dispute, and the most important matter for consideration from a financial point of view are the costs on exit from the Retirement Village.

Exit costs (sometimes called deferred management fees) are based on a percentage of the initial contribution, which varies depending on the number of years in the Village.  The percentages, and the rate at which they accrue, vary from Village to Village, and from contract to contract.

As well, different contracts make different arrangements for:

– capital gain (some allow it, some share it, most do not);

– reinstatement costs;

– renovation costs;

– legal or valuation fees (on entry or exit);

– costs of, and retention of any improvements.

The level of the Exit costs may mean that people who choose or have to leave (due to health or other reasons) may not have sufficient funds left to accommodate themselves elsewhere. Any retirement village contract therefore needs to be carefully considered not only in terms of entry price, but what will be left on exit.  Advice needs to be obtaining from someone experienced in Retirement Village Conveyancing, not general conveyancing.

Whilst some people say they’ll be leaving “in a box” the reality is that people often leave the retirement home or village before they expect, due to family changes, health issues, marriage breakdown, extended family relocation or a myriad of other personal reasons.

In obtaining advice about Retirement Village Conveyancing consideration needs to be given to the future possibilities. Where are the nearest Aged Care facilities?  Are they co-located with the Retirement Village?  Are there any discounts available or priority treatment relationships between the Retirement Village and the Aged Care facility? If not moving to Aged Care, what In-Home care options are available? At what cost?

The pros and cons and what’s involved in Retirement Village contracts ( coming in, ongoing, and going out) need to be fully understood, and the contracts entered into in full knowledge of the possible scenarios that may have to be dealt with down the track. We at Sunshine Coast Elder Law are experts in Retirement Village Conveyancing.

HELPFUL RESOURCES:

See our Blog about the New Retirement Village Contract Regime which commenced 1 February 2019.

See our Blog about the November 2019 Changes

We also have useful tips about choosing a Retirement Village.

See our Blogs about what to look for in a Retirement Village:

Checklist for Retirement Living Part 1

Checklist for Retirement Living Part 2

We also explain some of the lingo involved in Retirement Living Contracts and Aged care in our Blog about Unscrabble the Lingo of Retirement and Aged Care

We offer Fixed Fee Pricing for our Retirement Village Conveyancing. For details of our pricing click here.

Unscrabble the Lingo of Retirement and Aged Care

The terms used in Retirement Villages and Aged Care are confusing. Our Video offers some help here.

Find out more

Want further advice on Retirement Village Contracts or need help with Retirement Village Conveyancing? Don’t hesitate to contact us, either by calling or completing an inquiry form.