Retirement Villages are increasingly becoming a preferred mode of accommodation for senior Australians. In South Australia the Retirement Villages Act 2016 came into force on 1 January 2018. The new Act sets out the rights and obligations of residents and retirement village operators, and specifies information which must be provided to a prospective resident in a Disclosure Statement prior to signing on the dotted line.
When considering whether or not to enter a Retirement Village you should take into account two major factors:
- The financial costs of entering and living in a Retirement Village; and
- Lifestyle changes
Financial Costs – Retirement Village Contracts
The costs of entering a Retirement Village can be broken down into three classes:
Pre-entry costs
The pre-entry costs are also known as the “ingoing contribution”. This is the fee paid to the operator for the right to the accommodation. The fee does not give the resident a Certificate of Title (as would be the case with freehold title) nor does it give the resident the right to note his/her interest on the Operator’s Certificate of Title. The ingoing contribution can be considered to be a loan by the resident to the operator which is repaid on a date stipulated in the entry agreement. The amount of the ingoing contribution will vary and is based on a number of factors including the age and condition of the unit, the facilities available and the location of the Retirement Village.
Ongoing costs
The ongoing service fees are payable to the operator to maintain the village on a day-to-day basis.
Exit costs
Departure from the Retirement Village would be due to placement in an aged care facility, death, personal choice, or removal for breach of the Retirement Village rules. A deferred management fee is payable on departure and this fee should be clearly noted in the contract. The deferred management fee will be typically calculated by reference to the length of occupancy. When a new resident moves into the unit the operator will pay the initial ingoing contribution back to the outgoing resident (or his/her estate). There may also be other exit costs such as re-marketing fees, refurbishment and renovation costs. These costs must be clearly disclosed in the entry contract.
Lifestyle changes
Retirement Village living is clearly not for everyone. A person who values their privacy and is not comfortable with social interaction will probably not be suited to living in a Retirement Village.
Some operators allow residents to keep a small pet in the unit but the rules of the Retirement Village should be consulted before committing to entry if this is a consideration. Particular attention should be paid to the rules to ensure that they are suitable for the prospective resident.
Documents provided to new residents
The new legislation requires the following documents to be provided to a prospective resident:
- The Residence Contract;
- The Disclosure Statement (setting out all fees and charges and how the exit entitlement is calculated among other things);
- If the Village is already established the financial statement of the last annual general meeting and any subsequent changes that would affect a resident’s decision to enter the village;
- A copy of the minutes of the last 2 annual general meetings;
- The residence rules;
- The re-marketing policy; and
- Any code of conduct to be observed by operator or residents.
These documents must be given to the prospective resident at least ten (10) days before signing. A cooling-off period of 10 business days is available after signing the documents.
The Disclosure Statement will contain a statement recommending independent legal and financial advice to be obtained.
There is a large amount of information about Retirement Villages, Retirement Village Contracts and the new legislation at the SA Government site for Aged Care: “Retirement Housing – Information for Residents“.
The decision to enter a Retirement Village is a major decision requiring a substantial financial commitment at the initial stage and for the length of tenure. Advice obtained from an experienced legal practitioner is a worthwhile investment and may help avoid a contractual disaster.
For further information please contact Jason Meyer on 8362 6400 or email Jason Meyer. Join our mailing list to receive updates and advice on current issues.
