Top 10 things to know about Retirement Village Entry
Retirement Village Entry
Top 10 things to know
"There are many benefits of residing in a retirement village. However, it is extremely important to make sure you enter a village fully informed as to what to expect going in, while you are there and when you need to leave. This should involve obtaining both legal advice in relation to the specifics of the village contractors and financial advice to ensure you understand how the numbers may work". - Jo Twible, KJB Law Canberra.
It is NOT just like buying a house - it is more complex. Buying a house involved one contract with the end result that your name is registered as the owner of that property on the Land Titles Register. When you enter a Retirement Village, this is not always the case and your entry might involve up to four contracts.
There are 3 main different types of village models. There are 3 main different retirement village models used in the ACT - Unit Title, Sublease/Underlease models and Licence models. Each different ownership model involves different rights for the resident including when you are whether or not you have to pay stamp duty.
Cooling off periods. Your contract with the operator contains a cooling-off period - from when you sign until midnight on the 7th Business Days after the Operator returns the Village Contract, signed by them to you. If you buy a unit in a Unit Titled Retirement Village, you have a separate cooling off period for your contract with the Selling Resident as well which runs for a slightly different period. If you move in before the end of the cooling-off period, you waive it!
Settling in Periods: If you move in and decide you don't like living in a retirement village, the law says that provided that you give notice and move out within 90 days of the earlier of having moved in or having the right to move in, you get back all your money less an admin fee. The time to get your monies back varies on the model of the village.
Budgets: Each year the operator proposes a budget settling out what they propose to spend to operate and maintain the village. The residents get to vote on the proposed budget. If the residents don't approve the budget (approval is by simple majority), then the operator either has to rework the budget and try again with the residents until they do approve a version of it OR the operator has to apply to the ACT Civil and Administrative Tribunal (ACAT) for approval. Seeking approval is not a rubber-stamping process!
Recurrent charges: You pay a fee (usually monthly) to meet the costs of running the village (ie the approved budgeting costs). Unless Recurrent Charges are determined by a formula or are fixed, the Residents also get to vote on the recurrent charges. Again, if there is no agreement about the Recurrent Charges, ACAT can make a decision. You need to be aware of the facilities and services offered by the village and be alive to the reality that the more facilities and services, the likely the higher the Recurrent Charges.
Maintenance vs Replacement vs Improvement Costs: The cost of maintaining the village are paid for from the Recurrent Charges. The cost of replacing or improving parts of the village is paid for from the Operator's own monies. Sometimes, the same activity can be maintenance, replacement or improvement - eg touch up painting or repainting to maintain woodwork is maintenance, re-painting when a resident moves out as part of reinstatement of a unit or changing paintwork from a standard finish to a suede finish is not maintenance but replacement or improvement.
Departure fees/Upfront Management Fees/Non-Refundable Components of Ingoing Contributions. Operators commonly charge a Departure Fee (an amount calculated based on the next resident's ongoing contribution or your ongoing contribution, the length of time you reside in the Village and a particular percentage figure). Some Operators charge what they call an Upfront Management Fee and then don't charge a Departure Fee when you leave. Some Operators will say that a set component of the ongoing Contribution is non-refundable, regardless of your length of stay, and then still charge a (usually smaller) Departure Fee.
Capital Gain & Capital Loss: In some Villages, you do not receive any of the capital gain nor do you bear any of the capital loss. In other villages, the capital gain/loss may be shared (explicitly or effectively) between the operator and the resident. If any of the capital gain is to be received or Capital Loss to be borne by the resident, it is important for you to understand how that capital gain will be calculated - it may not be in the manner you think!
When you get your money back! If a new resident is found for a unit quickly, the Operator has to pay the outgoing resident what they are due within 14 days of a new resident entering into an agreement for that unit or moving in (whichever occurs first). However, if a new resident is not found then when you get your money depends on the model of Village Contract which applies and the Operator's own policies. Some people will get their money back with 6 months (or potentially sooner), for some it may be within 2 or 5 years, for others they just have to wait for a buyer to be found. It is incredibly important for you to understand what applies in your case!