The benefits of retirement villages and living conditions are well established however, retirement villages contracts have long been controversial issues among Australia’s ageing population. In a recent article published by Bina Brown from Third Age Matters, Binna discussed some of the pros and cons of retirement villages.
“There are three main contract and finance models used by the country’s estimated 2000 retirement villages:
- outright ownership, which gives the unit owner a title over the unit;
- the loan licence model, where the bulk of the ingoing contribution is set up as a loan to a village operator in return for a licence to occupy the unit; and
- the leasehold or sublease model.
In each case there is an ingoing contribution often similar to the cost of buying the unit. There is generally some form of departure fee based on the length of time someone lives in the unit. Operators also charge weekly, fortnightly or monthly fees, called recurrent charges, that cover the day to day operating costs of the village and may or may not include rates, water, electricity, maintenance of common areas and staffing costs.
Depending on the legal structure, residents may or may not share in any capital gain in the value of the unit when they leave the property. Whether a resident has to contribute towards the refurbishment of their unit before it is sold can depend on where they live and when they entered their village.
Except for unit title models, a person’s name is not generally on the title of the unit and they rely on the contract and the relevant legislation to give them security of tenure if the village is sold or the operator goes bust.”
Binna makes some important points for those considering retirement villages contracts. The contracts are often complex and in many cases up to 100 pages of detail (which many of us consider too confusing at the later stages of our lives). As we know, the devil is in the detail so we would strongly recommend consulting with legal counsel before taking that leap of faith into a retirement village contract that may have pitfalls for you or your family later in life.