Scrutinising Retirement Village Contracts

Retirement village living is marketed as a lifestyle choice meeting the needs for over 55s. However, it is an expensive choice by comparative standards of normal home ownership.

Martha sold her home to enable her to enter into a retirement village contract, only to find that when she needed to exit her unit to go into a nursing home, her retirement village entry fee had dwindled to a lower amount than that required to pay for a nursing home facility.

There are various types of contracts and legal agreements to enter into retirement villages. These include Loan, Licence or Leasehold Agreements, as well as Strata Schemes.

There is no registered ownership on title for Loan, Licence and Leasehold Agreements. All agreements have fees that will impact and diminish the initial entry payment upon exit.

Pitfalls to be aware of include:

1. Entry payment with a negative return.
2. Recurring charges or ongoing fees.
3. Exit fees diminishing the entry payment.
4. Additional exit fees such as restoration of the premises.

Exiting a retirement village can be a costly exercise where residents have little or no control over the exit fees imposed upon them in their agreements. Such fees include a percentage of the entry fee up to a maximum amount depending on the length of time residents live in the village, restoration fees for the refurbishment of the unit, and re-sale delays and expenses.

Obtaining financial and legal advice before entering into retirement village agreements is essential to avoid unforeseen and detrimental financial outcomes when exiting the village.