Monday, 19 December 2022

Legal documentation for retirement villages is often extensive and complicated — you will almost certainly need a solicitor to explain the documents effectively.

Why move to a retirement village?

Retirement village living offers an accommodation and lifestyle alternative which suits many people in the later years of their lives.

Reasons to move to a retirement village can include:

  • freedom to travel and not worry about your home while away;
  • reduced maintenance and repair responsibilities;
  • accommodation that is more suited to supporting continuation of independent living (no stairs, or lifts to travel between floors);
  • emergency call buttons to summon assistance; and
  • companionship.

Entry into a village is usually for those over 55 years of age. However, the average age of entry is in the mid-seventies, and residents are most often aged somewhere in their mid-seventies to mid-eighties.

What is a retirement village?

A retirement village is essentially a community for seniors. You don’t have to be retired to enter into a village — a frequent misconception!

Retirement villages are not Residential Aged Care Facilities. A Residential Aged Care Facility provides 24-hour care for residents, including fully furnished accommodation, the provision of all meals, the provision of personal care and nursing services as required. Entry into a Residential Aged Care Facility requires the proposed resident being assessed as eligible for admission by the relevant government organisation and admission is on a ‘needs’ basis.

By contrast, retirement villages are usually designed for people able to live independently or predominantly so, with any support required being of a kind able to be provided within the resident’s own home.

Some retirement village operators are also approved providers of ‘in home’ care and are able to provide personal, domestic or nursing care assistance to retirement village residents under the ‘in home’ care model. Alternatively, other ‘in home’ care providers can provide that care.

The level of ‘in home’ care some operators are able to provide can be extremely high and some operators have specific apartments within which residents with high care needs can reside, which may make it quite difficult to tell the difference between a particular retirement village and a Residential Aged Care Facility. However, the funding models for ‘in home’ care vs funding for a residential aged care facility are quite different and it is important for any prospective resident to fully understand these differences.

Each State and Territory has enacted specific legislation that regulates the operation of retirement villages, and defines what is and what is not a retirement village. The legislation in each State and Territory is not identical and a resident’s legal rights can differ significantly between each State and Territory.

The relevant legislation in the ACT is the Retirement Villages Act 2012.

Legal structures

In the ACT, there are three commonly used legal structures for obtaining the right to reside in a retirement village. These legal structures are:

  • Long-term lease
  • Long-term licence
  • Strata title

However, other legal structures which might be used include:

  • Community title
  • Company title
  • Unit trust
  • Manufactured home
  • Conventional Lease

The structure adopted by a particular village will depend on where it is located.

Different structures can have different implications and raise different issues in terms of applicable legislation. Your solicitor can help guide you through the legislation applicable in your State or Territory.

Retirement village contracts

The number of contracts you need to enter into when moving into a retirement village can vary depending on the village you are entering and the legal and financial model they use.

In some villages you enter into a single contract; in others, it could be as many as four contracts.

However the village structures its documents, included in them will be clauses which deal with:

  • rights to change your mind about your entry, and time limits on those rights;
  • responsibility for maintenance, repair, and replacement of items within the village and your premises;
  • your contribution towards the operating costs of the village and how those contributions may change over time;
  • the limits on your rights to alter or add to your premises;
  • the circumstances in which your village contracts may end, and the steps you or the operator are required to take for that to occur; and
  • the time frames to get your money back after you leave.

Your solicitor can help guide you through the village contract and advise you on your rights and responsibilities.

Financial considerations

As a resident of a retirement village, you may be required to pay:

  • an initial entry fee (or ingoing contribution) when you move in;
  • rent and/or recurring service charges during your stay, and perhaps beyond;
  • optional service charges for extra services which might be provided on a fee for service basis and
  • a “Departure Fee”, deferred management or membership fee, or exit fee when you leave or, in lieu of fees on exit, an upfront management fee or membership fee.

The costs will depend upon the particular legal structure of the retirement village. Many retirement villages now have multiple financial models on offer.

When entering a retirement village and considering the legal documentation, your solicitor will work closely with you and your financial planner or accountant (if you have one) to ensure everyone understands the financial models on offer so that you can decide which model may be best for your circumstances.

Why do you need your solicitor?

Entry to a retirement village is more legally and financially complex than buying or selling a house that is not in a retirement village. Legal documentation is often extensive and complicated and will almost certainly vary from village to village.

The documentation may have financial implications that you had not envisaged — this in itself is very complicated and the process needs to be explained effectively.

There are different entry and departure fee structures associated with each village, and it is important that you fully understand the financial consequences to you if you leave the village.

Your solicitor will help you by guiding you through the documentation, answering any questions or concerns you may have, and ensuring that you understand the documentation before you sign it.

Finding a solicitor

The Law Society can help you find a law firm with expertise in retirement village documentation. Call 02 6274 0300 during business hours and ask for a list of firms.

You can also use the search function on the Law Society’s website to find law firms with particular areas of practice. Go to ‘Find a Firm’ and select ‘Retirement village contracts’ in the ‘Areas of practice’ field.

This publication is intended as a simple guide. It is not, and must not be taken to be, legal advice. For legal advice please consult a solicitor. While every care has been taken to ensure the accuracy of the information contained in this publication, the ACT Law Society does not make any representations or warranty as to the accuracy of the material in the publication. The publication has been written according to the applicable laws in Australia relevant to a resident of the Australian Capital Territory as at December 2022.