What to consider when researching retirement village living contracts

Have you started researching making the move to a retirement village? If so, this article is here to help you navigate the different NSW government regulations, types of retirement village ownership options, and contract types you may need to consider before deciding on which village best suits your situation and plans.

Different retirement village operators offer a variety of ownership arrangements, including both registered and non-registered options. If you are looking at a village within New South Wales, then the contracts and regulations are governed by the Retirement Villages Act 1999 (NSW) and the Retirement Villages Regulation 2017.

These laws were established to safeguard retirees when purchasing or leasing a retirement property, while also regulating retirement operators to ensure transparent disclosure of all rules, regulations, entry costs, ongoing charges, and exit fees.

What should be in every contract?

According to the NSW Act and regulations, village operators must provide a standardised contract with clear and easily understandable terms and conditions. This ensures that if you are considering village living you can fully grasp what they’re committing to, including your rights and associated fees if you decide to change your plans, move out, or pass away.

Contracts must cover the type of ownership of the unit, entry costs, the settling-in period, recurrent charges, services and facilities, alterations and additions, repairs and maintenance, your share of any capital gain/loss (if relevant) and any departure fees. The contract by law must also include a disclosure statement, condition report, the village rules, and a full list of all the village services and facilities available to you as a resident.

It’s important to note that these contracts are quite complex and lengthy documents. If you’re considering a retirement village, it’s highly advisable to seek guidance from both a lawyer and your financial advisor. They can help you understand the risks and benefits outlined in the contract before you make any commitments.

Important clauses to consider when choosing your village

It’s important to grasp the type of ownership associated with the units in the community you are considering. The type of ownership determines the rights and responsibilities associated with your unit.

For example, St Agnes’ Village includes clauses such as rates and taxes, village rules, pets, use of premises, temporary guests, motorised mobility devices, contents insurance, enduring power of attorney or enduring guardian, rubbish, car parking, and breakdown of essential services, amongst others.

Registered Unit Ownership

Certain ownership types provide a registered interest (depending on the retirement village you’re considering), which could include:

● Owner of a lot in a strata scheme – you will become the proprietor of the unit via a sale of land contract.

● Owner of shares in a company title scheme – if the village is owned by a company, you must buy shares of the company to become one of the owners of the scheme that owns your unit. This gives you the right to occupy the unit.

● Owner of a lot in a community land scheme – you will become the proprietor of the unit via a sale of land contract.

Understanding your rights concerning the unit is very important. It impacts your ability to sell, including when and how you can do so, as well as the fee structure, including any applicable exit fees if you decide to leave the village.

Registered long-term lease – you’ll be a registered lessor of the unit, for 50 years or more. This is known as a leasehold interest. You will be entitled to 50% or more of the capital gain.

It’s very important to understand the rights that you have with the unit. This will affect your ability to decide when and how you can sell, as well as the fee structure which will apply, including any exit fees that will apply if or when you choose to leave the village.

Unregistered Unit Ownership

● Loan and Licence – some retirement villages (usually those that are not-for-profit such as church or charity-organised villages) offer units for loan and licence, rather than for purchase or leasehold. In this case, you do not own the premises. The village grants you the right to occupy the premises as a non-registered interest holder

● A loan and licence arrangement means you pay an ongoing contribution to the owner (usually by way of an interest-free loan) part of which is non-refundable as a donation to the gift or charity. Regular recurrent charges will also be payable with this arrangement.

● Rental arrangement – just as you would lease a home or unit from a real estate agent, some retirement villages allow you to lease a unit in the usual way via a form of residential tenancy agreement. For further details about retirement village contracts visit the NSW Fair Trading website. At the NSW Fair Trading retirement village calculator webpage you will find a very helpful calculator which can assist in estimating all the costs involved in moving into (and out of) a retirement village.

For more information about our retirement villages and available villas, please get in touch with us here

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