Retirement and Lifestyle Villages continue to be a popular choice for older people who are looking to downsize and are attracted by the security and support found in a Village. At Parry Field we offer experienced legal advice on purchases in Retirement Villages across the range of villas, units, apartments and care suites.
What are you buying in a Retirement Village?
Most Villages offer an Occupation Right Agreement (ORA) also known as a licence to occupy the unit. An ORA entitles the resident to live in the unit but the ownership is retained by the Retirement Village. The Village also owns and manages the communal areas that you share with other unit owners. Unlike a freehold title the resident does not have full control of the unit and usually cannot use the unit as security for a bank loan.
Because the Village is the owner when the unit comes to be sold most Villages keep the capital gain (or incur any capital loss) made on the resale of the unit. The Village also usually does the redecorating prior to the sale. The timing of the sale funds being paid to you is usually delayed until the new resident has moved in.
Some villages are set up with ownership held by the residents by way of a unit title ownership for example. There are still usually restrictions on who you can sell the unit to, such as age limits.
Deferred Management Fees
On the sale of the unit a percentage fee is deducted from the amount you purchased the unit for, so you do not get the full purchase price back. Villages refer to this fee by a range of terms such as “Occupation Licence Fee”, “Village Contribution Fee” or “Net Management Fee” and in most villages the maximum is currently about 30% of the purchase price.
Other Fees
You will also pay a weekly service fee which may be fixed or may increase over time. If you get additional services in your unit (especially if it is a serviced apartment or a care suite) there will be additional fees for those services.
Retirement Villages Act 2003
Under the current legislation there is a register of Retirement Villages and an independent statutory supervisor. The statutory supervisor monitors the financial position of the Village which must provide annual audited financial statements. The statutory supervisor also holds the deposit you pay until you move into the village. The Act also requires disclosure of ORA terms to you. There is also a mandatory 15 working day cooling off period during which you can cancel after signing an ORA.
Legal advice
It is mandatory for intending residents to have independent legal advice before signing an ORA which means the lawyer witnessing your signature must explain the general effects of the agreement and its implications in an easily understood manner. There is no standard form agreement so it’s important that a review is done for the specific village. It’s also important to make any application conditional on the sale of your existing home if you need those funds to purchase the ORA. We can assist with this advice and encourage you to discuss your plans with us as soon as you start looking at moving to a Retirement or Lifestyle Village.
Partner, Luke Hayward, and Associate, Jo Mechaelis-Wall, specialise in advising on Retirement Village law.
The information contained in this outline is of a general nature, should only be used as a guide and does not amount to legal advice. It should not be used or relied upon as a substitute for detailed advice or as a basis for formulating decisions. Special considerations apply to individual fact situations. Before acting, clients should consult their Parry Field Lawyer.
