Retirement Village Leases

Usually, you must be over a certain age (usually 55 years of age) to purchase a unit in a retirement village and you must be able to live independently.

Sharing the cost by way of communal living allows you to better plan your costs of living. There will be more certainty over your household budget. Whether or not this works out cheaper for you, depends on your village. You should speak to a financial planner in this respect.

The costs depend on the particular contract that you will enter into. These may include entry costs, ongoing and exit payments, refurbishment fees, capital gains share, holding charge etc. It is best to go through the contract in detail with LawRep to fully understand all of the costs involved.

In order to occupy the unit, you must pay an entry payment. This payment allows you to secure a unit and takes the form of an interest-free loan for the period of the occupancy. You will then enter a lease where you will have exclusive use of the property.

You will be required to pay a recurrent fee to cover the costs of running the village. These may include building maintenance, council and water rates, lawn mowing, gardening, insurance etc and depend on the agreement you have entered into.

There are laws in place to limit increases of recurrent fees. Usually they are increased by the CPI each year of more if the majority of village owners agree. However, special fees or levies may be raised for refurbishment of dwellings of communal areas. Your lawyer will advise you if you contractually bound by any variation of fees.

The operator can continue charging recurrent fees after you vacate the property. This is why it is very important to go through the lease with LawRep so you can understand your obligations once you vacate the premises.

The Exit Payment or Deferred Management Fee is payable when you vacate your property. The idea is to lower the initial purchase price and pay this off at a later stage. The fees are a source of income for the village owners, in addition to the recurrent payments. It is usually deducted from the re-sale price.  How much you will pay may depend on certain variables such as the duration of your stay and it is calculated as a percentage of your purchase price. While exit fees can provide more flexibility and reduce entry prices, the overall costs can be significant. You should seek legal advice to be clear on the terms relating to exit-fees.

Your interests under the leasehold are secured by the residence agreement, the Retirement Villages Act 1992 and the Retirement Villages Regulations 2017. The operators and employees are required to abide by a set of rules of conduct and must act in the best interest of residents. Your lawyer can advise you if operators have acted within their rights.

Depending on the terms of your agreement, you may profit from capital growth upon resale. However, a share of your capital gains may be deducted as part of your departure fee if you leave the village.

As a resident of a retirement village, you are required to pay recurrent fees on a monthly, fortnightly or weekly basis. You must ensure that you understand fully which services are covered by these fees and which are not. The village operator is required to hold annual meetings that you and a family member can attend. At the meeting, operators must provide a summary of the costs incurred.

Your interest depends on the type of occupancy. A leasehold secures your interest in the property. Leases are required to be registered in NSW. Under a lease, you have an exclusive right to possession and the landlord cannot access the property without your permission. The landlord cannot terminate the lease without giving you notice or reasonable time to rectify any breach that would have led to the termination.

The retirement village operator may be able to terminate the lease if you are in breach of your contract and if they have given you sufficient notice to fix the breach. The notice must also detail the breach. However, termination may also depend on the terms in the lease.  There are different requirements for licence agreements and strata title retirement villages.

You can stay in your unit as long as it is obtained in joint names. We strongly recommend adding both your names to the contract.