Retirement Villages

Retirement Village Contracts in NSW

Moving into a retirement village is both a lifestyle decision and a significant financial and legal commitment.

Retirement village arrangements can be quite different from an ordinary residential property purchase. The amount you pay when entering the village, the ongoing charges, your rights while living there and the amount you receive when leaving will depend upon the particular ownership or occupancy structure and the terms of the village contract.

It is important to understand these arrangements before signing a retirement village contract.

Retirement Villages Are Not the Same as Aged Care

A retirement village provides accommodation and may provide various facilities and services for residents, but living in a retirement village does not automatically entitle a resident to aged care services.

Prospective residents should consider both their present lifestyle requirements and how suitable the village may be if their circumstances change in the future.

Different Types of Retirement Village Arrangements

There are several ways in which a person may obtain the right to live in a NSW retirement village.

Depending upon the village, the arrangement may involve:

• a registered lease;
• a loan or licence arrangement;
• ownership of a strata or community title unit;
• company title arrangements; or
• another form of occupancy permitted under the retirement village legislation.

The legal and financial consequences can differ considerably between these structures.

Disclosure Before You Sign

NSW retirement village legislation contains disclosure requirements designed to give prospective residents information about the village and the proposed arrangement before they commit themselves.

A prospective resident must generally be given a disclosure statement at least 14 days before signing the village contract. The statement contains important information about the village, fees, services and proposed residence arrangements.

The proposed village contract must generally be provided to the prospective resident at least 14 days before it is signed.

This period provides an important opportunity to obtain independent legal and financial advice and understand the long-term consequences of the contract.

What Should Be Reviewed in a Retirement Village Contract?

A retirement village contract can contain substantial financial obligations extending well beyond the initial amount paid to enter the village.

Before signing, particular attention should be given to matters including:

• the entry payment or purchase price;
• the legal nature of your right to occupy the premises;
• recurrent or ongoing charges;
• responsibility for repairs and maintenance;
• services and facilities provided by the village;
• how recurrent charges may increase;
• renovation and alteration rights;
• capital gain or capital loss arrangements;
• departure fees;
• reinstatement or refurbishment obligations;
• the process for leaving the village; and
• when money owing to you after departure must be paid.

Departure Fees and Exit Costs

One of the most important aspects of a retirement village contract is what happens financially when the resident eventually leaves.

Depending upon the contract, the resident may be required to pay a departure fee or share part of the capital gain with the village operator. There may also be provisions dealing with refurbishment, reinstatement, sale costs and recurrent charges after the resident has vacated.

The amount ultimately returned to a resident or their estate can therefore be substantially different from the amount originally paid to enter the village.

These provisions should be understood before the contract is signed rather than when the resident later decides to leave.

Cooling-Off Period

A person who enters into a NSW retirement village contract generally has a 7-business-day cooling-off period.

During the cooling-off period, the resident can generally rescind the contract by giving the required written notice.

The cooling-off right can be affected if the resident moves into the premises during that period, so legal advice should be obtained promptly if a resident wishes to withdraw from a contract.

The 90-Day Settling-In Period

NSW retirement village residents also generally have a 90-day settling-in period.

This provides additional protection where a resident moves into a village and then decides that the arrangement is not suitable.

If the contract is terminated during the settling-in period, special rules apply to the amounts that may be charged and the money that must be returned to the resident.

The precise financial consequences depend upon the resident’s particular contract and type of residence arrangement.

Ongoing Charges

Residents commonly pay recurrent charges towards the operation and maintenance of the retirement village.

These charges can contribute towards matters such as administration, gardening, maintenance, security, insurance and shared facilities.

The contract should explain the recurrent charges and how they may be varied.

Prospective residents should consider not only whether they can afford the initial entry payment but also whether the ongoing costs are sustainable over the longer term.

Repairs, Maintenance and Capital Works

Responsibility for repairs, maintenance and replacement of items within a retirement village can depend upon the legislation, the nature of the item and the particular residence arrangement.

Residents should understand which expenses are their responsibility and which are the responsibility of the village operator.

Learn more about our Property Law and Conveyancing services.

The condition of the premises and any condition report supplied with the contract should also be reviewed carefully.

Leaving a Retirement Village

Leaving a retirement village can involve considerably more than simply selling a conventional residential property.

The applicable process can depend upon whether the resident is a registered interest holder or holds another form of occupancy right.

The contract may regulate matters including the marketing of the premises, appointment of selling agents, refurbishment, recurrent charges, departure fees and payment of the resident’s exit entitlement.

Understanding these provisions before entering the village can prevent unexpected financial consequences later.

Retirement Village Contracts and Estate Planning

A retirement village arrangement should also be considered as part of a resident’s broader estate planning.

The way a resident’s interest in the village is dealt with following death may depend upon the legal structure of the arrangement and the terms of the contract.

Residents should consider whether their Will, Power of Attorney and Enduring Guardianship arrangements remain appropriate when moving into a retirement village.

Learn more about Wills, Powers of Attorney and Enduring Guardianship.

Get Independent Legal Advice Before Signing

A retirement village contract can affect a substantial portion of a person’s retirement assets and may create financial obligations lasting for many years.

Russell Kelly & Associates can review a proposed retirement village contract, explain the legal structure and important financial provisions and advise you before you commit to the arrangement.

For current consumer information about retirement village contracts, disclosure, cooling-off rights and the settling-in period, see the NSW Government retirement village guidance.

Contact Our Office

This information is general in nature. Retirement village rights, costs and obligations depend upon the particular contract, residence structure and circumstances. Independent legal and financial advice should be obtained before entering into a retirement village arrangement.