People occasionally approach me for advice about acquiring a unit in a retirement village. More often though, I have to consider the documentation they have signed as they wish to dispose of the unit in order to fund their move into permanent residential care. Many people have very positive experiences of life in the retirement villages.
The villages often have extensive social and sporting facilities, well-maintained grounds and there is the added pleasure of being near to many neighbours of similar age and with similar interests to them.
There are however some common problems that have confronted several of my clients.
1. While the acquisition price for the unit is usually a little lower than what they might pay for a similar freehold unit in that location, they are usually not purchasing the unit but instead acquiring a right to reside in the unit for the rest of their and/or their partner’s lives.
2. These interests are harder to dispose of than freehold owned property particularly when the property market is not buoyant.
3. In a large complex there are invariably many virtually identical units on the market at the same time which can affect the time it takes to dispose of a unit and the price realised.
4. The larger developments often are developed in stages and it is not unusual that a resident is needing to dispose of his or her unit while the developer is actively marketing new units it has just developed.
5. Retirement villages contracts usually contain a clause directing that the marketing of the unit will be done only through the agency of a selling agent appointed by the operator.
6. Almost all contracts provide that the purchaser will on the disposal of his or her interest in the unit pay a deferred management and administration fee to the operator which could be between 25% and 40% of the price realised on disposal.
7. A reinstatement clause in the agreement will require the vendor to pay for the cost of a significant renovation of the unit with items such as new kitchen and bathroom fittings, cabinetry, floor coverings, window treatments etc.
Callum Foote of Michael West Media in a very interesting Retirement Villages article quotes Robert Drake a former senior executive in financial literacy at ASIC as saying that most retirement village contracts are among the most complicated financial contracts he has ever seen.
At present retirement village contracts in WA are regulated only to the extent that the operator needs to give full disclosure to the intending purchaser. At the time of choosing to move into their new lifestyle complex, purchasers are given a mass of glossy brochures, booklets and bound contract documentation, often running into hundreds of pages. It is unsurprising that so many people are genuinely shocked when they realise the extent of the costs they have to absorb when disposing of their interest in a retirement unit.
We can assist you and your loved ones with Retirement Living.
Contact us or call Lewis on 0408 093 298
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Frequently asked questions
Why are retirement village contracts considered so complicated?
Retirement village contracts are among the most complex financial agreements in Australia. They combine entry payments, ongoing fees and deferred management fees that can significantly reduce what you get back when you leave. Many residents only discover the financial impact when they need to sell the unit to fund a move into permanent residential care.
What happens to my money when I leave a retirement village?
It depends on your contract. Most villages charge a deferred management fee, calculated on either your entry price or the resale price, which is deducted when you exit. There may also be refurbishment and marketing costs. This is why it is vital to understand the exit terms before you sign, not after.
Is a retirement village the same as an aged care facility?
No. A retirement village is independent living with shared facilities, not funded aged care. If care needs increase, many residents eventually move into residential aged care, which is where the financial complications of exiting a village often surface. Understanding both stages early helps families plan the transition calmly.
Should I get advice before buying into a retirement village?
Yes. Because the documentation is complex and the long-term financial consequences are significant, independent advice is worthwhile before you commit. We help families review the contracts and understand their options, whether they are buying into a village or preparing to leave one.
Can you help if I need to move from a village into aged care?
Yes. Moving from a retirement village into residential aged care means both exiting the village contract and funding the new care arrangement. We can help coordinate the move, compare suitable facilities, and make sure a partner or parent is supported through the transition across Perth and WA.
