Retirement village contracts in NSW: an introduction

Moving into a retirement village can be a very positive lifestyle change – community, amenities and support are often key attractions, and rightly so.

But retirement village contracts in NSW can be complex, with fees and rules that operate differently to an ordinary residential lease or strata purchase.

1.     What is a “retirement village contract” in NSW?

In NSW, retirement villages are regulated under the Retirement Villages Act 1999 (NSW) and its regulations.

A resident’s rights and obligations are set out in what is known as a “village contract” with the retirement village operator.  Depending upon how the retirement village is structured, the village contract may be a residence contract or a service contract, or act as a combination of both.

A residence contract covers the right to live in a residence in a retirement village. A service contract covers the provision of general services and/or optional services in the retirement village to a resident.

Broadly speaking, arrangements will address:

• The payment of an ingoing contribution (an upfront payment to the operator to secure the right to live in the village). This payment will not apply if you are purchasing a strata property – you will make the payment to the outgoing resident owner instead.

• The right to access and use common facilities at the village.

• Ongoing charges for operation/maintenance of the village.

• Rights and obligations that apply whilst you reside in the village.

• A procedure about what happens (and what you pay) when you leave the village.

2.     The key documents

Retirement village documentation commonly includes:

• Village contract - being the residence contract or the service contract.

  It could be a lease, licence or other contract.

  
  

• Disclosure statement

  Sets out key information about the unit, costs, services, and exit arrangements. It must be given to you at least 14 days before the village contract is signed.

  
  

• Village by-laws / village rules

  Day-to-day rules (for example, pets, parking, visitors, noise, renovations, use of facilities).

  
  

• Condition report 

  Records the condition of the unit on entry into the village.

  
  

• Services agreement (where applicable)

  If additional services are provided (for example, meals, cleaning, assisted living services), these may be documented separately.

3.     Costs in a retirement village

Retirement village costs can be categorised into three phases: entry, fees paid whilst living at the village, and exit.

Entry costs are the ingoing contribution and any legal & administrative costs you must pay when entering a village. An ingoing contribution can be substantial and almost mimic a purchase price to buy a property.

Ongoing costs are regular fees and charges payable while you live in the village. These commonly include:

• Recurrent charges (sometimes called operating fees)

  These may cover items like gardening, common area maintenance, staff, insurance and upkeep of facilities.

  
  

• Utilities and usage charges

  Electricity, gas, water and internet may be separate, partly included, or charged under an internal village arrangement.

  
  

• Optional charges

  If they apply, these will cover items like washing, cleaning, meals, and personal assistance.

A key point to consider is how recurrent charges can increase over time, and what consultation or notice requirements apply.

Exit costs

When you leave a retirement village, several financial issues can arise, including:

• Departure/exit fees (sometimes called a deferred management fee)

  Typically calculated as a percentage, accruing over time up to a cap. These fees can be substantial.

  
  

• Costs of “make good” and refurbishment

  The contract may require you to pay for reinstatement, repairs, repainting or replacement of items, beyond fair wear and tear.

  
  

• Selling/re-letting process and fees

  Depending on the arrangement, the operator may control resale/re-letting and there may be marketing or administrative fees.

  
  

• Timing of refund of your ingoing contribution

  The village contract will contain detailed provisions about when you are paid and what must occur first (for example, a new resident ‘buying’ in).

Exit arrangements must be considered with care. The estimated net amount you (or your surviving spouse or your estate) receive back and when you receive it is very important to understand as part of your decision making.

4.     Practical steps before deciding to enter a retirement village

Retirement village decisions involve legal rights & obligations, substantial financial commitments and impacts on mental & emotional well being.

Practical steps to take before signing include:

• obtain and read the disclosure statement and all village rules

• ask for a clear schedule of all entry fees, ongoing charges and exit fees (with worked examples)

• get independent legal advice on the contract and disclosure documents

• consider financial advice on affordability and exit impacts

 

5.     Need advice on a retirement village contract in NSW?

If you’re considering a retirement village lease or purchase, or you are planning to exit a village and need clarity on fees, refunds, refurbishment obligations or your rights, you should seek advice. We welcome you to get in touch.

This is general information only and does not constitute legal advice. Advice should be sought for your specific circumstances. Information is relevant as at the date of publication.