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Behind the gloss of Retirement Village Contracts

One of the most important decisions you may have to make in your retirement is deciding where you are going to live. Many choose to stay in their own homes while others opt for a sea change to enjoy the comfort and security of a retirement village. Lawyer Katherine Hayes, shares her advice for understanding what’s involved in a signing a retirement village contract.

126532964-featuredOn 1 October 2013, the NSW Government introduced important changes to the regulation of retirement villages. The aim of these new requirements is to make it easier for a prospective resident to compare the costs and conditions between villages prior to signing a contract.

One of the conditions of this new legislation is that all operators must now provide prospective clients with the following:

  1. A standard retirement village contract
  2. A general inquiry document and disclosure statement. An operator must provide this within 14 days after becoming aware that a prospective resident (or someone acting on their behalf).

WHAT YOU NEED TO KNOW BEFORE SIGNING A RETIREMENT VILLAGE CONTRACT?

  • Retirement Villages offer a wide range of amenities and living conditions and it is important that you take the time to understand what you are actually signing up for! Unfortunately, retirement village contracts are typically long and detailed due to the fact that they cover a wide range of conditions over a long period of time.
  • Each contract should discuss the rules as they pertain to those who live in the village and also outline the assessments and other potential fees that could result for certain actions or needs. All of the offered services for healthcare and the conditions should be highlighted in the contract.
  • Bear in mind that each State has different laws relating to Retirement Villages. This is important for consumers to know as many choose to move States to retire. Retirement Villages in NSW are regulated by specific legislation and it is important to check that the retirement village is included on the Land and Property Management Authorities register. If it is not registered then it is not covered by the Act.
  • Get clear on the differences between residential care facilities and retirement villages. Residential aged care facilities are funded and operated under Commonwealth Government legislation (the Commonwealth Aged Care Act). This means it will also receive funding from the Federal Government to provide support and care for frail older people who have been assessed as needing care by an Aged Care Assessment Team (ACAT).
    • Retirement villages on the other hand operate under state legislative frameworks. Some operators offer both retirement village living and aged care facilities. It is also important to recognise that a retirement village resident will require a new contract if they move into an aged care facility. Consumers often don’t understand that there is no automatic transition from a retirement village facility into an aged care facility even if they are adjacent to each other and owned by the same operator.
  • Be aware of the different by-laws that govern the common areas of the village and your home. These include some very important items such as car parking, visitors (particularly in relation children and how long they can stay)

Case Study

I recently assisted a client who had to request from the village board to have her grandchildren stay for one week on the school holidays. Another client had to tell her adult son who was under 55 that he could not live with her in the village whilst he was recovering from a divorce. In addition, there are four main types of contract agreement.

These are as follows:

  1. A long term Lease – This is the most common form of title and it is estimated that 90% of village units are on long-term leases. This means that they operator retains ownership and the resident is buying a right to occupy the unit for a stated length of time.
  2. Strata Title. This is where you pay an agreed amount to a former resident or the operator which results in you owning the unit. In addition, you usually need to enter into a service agreement with the operator.
  3. Loan and licence. This may be offered by a not-for-profit organisation such as a church. Usually, you also pay a contribution in the form of an interest-free loan.
  4. Leasehold The lease is usually registered on the title deed, which protects you if the village is sold. You pay a lump sum for the leasehold.

Tip: Alternatively, look out for retirement villages with a rental agreement which usually only charge rent and none of the other fees.

Choosing to live in a retirement village is similar to making a large investment such as purchasing a house. Be aware that getting out of a retirement village contract can be difficult and expensive so make sure you do your homework or seek legal advice before signing.

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Katherine-HawesAbout
Katherine Hawes

With over 20 years’ legal and business experience, Katherine Hawes is the founder and principal solicitor of New Age Legal Solutions which offers fixed priced legal advice. To find out more about her work please see www.newagelegalsolutions.com.au or phone 02 9615 9635.
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