Retirement villages

Contributed by Katie Binstock, McInnes Wilson Lawyers and current to March 2018

In the later years of life, people may be required to find alternative accommodation which provides them with higher levels of care than can be provided in the home.

Retirement villages are complexes, or parts of complexes, comprising residential premises (other than residential aged care facilities covered by the Commonwealth Aged Care Act 1997) predominantly or exclusively occupied by seniors. You do not have to be retired to enter into a village.

Access Canberra has published a list of retirement villages.

Entry into a village is usually for those over 55 years of age. The average resident’s age is somewhere in the low to mid-seventies, with the average entry age being in the mid to high sixties.

Legal Structures

There are a number of legal structures for retirement villages in Australia, including:

• Long-term lease;
• Long-term licence;
• Residency tenancy agreements;
• Strata title;
• Community title;
• Company title;
• Unit title;
• Manufactured home;
• Conventional Lease.

Common structures in the ACT are loan-licence agreements, unit titled retirement villages and other types of agreements.

Loan-licence agreements typically involve the payment of an ingoing contribution (or loan) by a resident for the right to live in the premises on a long-term or permanent basis. The resident is typically entitled to a refund of the ingoing contribution minus exit fees payable on vacation of the premises.

Some agreements also provide for a proportional share of the capital gain of the unit to be kept by the resident upon sale.

In unit titled retirement villages residents own their unit. Residents are bound by the same requirements under the Unit Titles (Management) Act 2011 (ACT) as other unit owners in terms of ownership and maintenance of common property and must comply with the rules of the owners’ corporation.

Some residents obtain their right to live in a retirement village under a residential tenancy agreement (under the Residential Tenancies Act 1997 (ACT)) on a short term or long term basis. This is the same as leasing a house or a unit on a private commercial basis. Some not-for-profit organisations that operate retirement villages sometimes offer low-cost rental options for some residents.

Retirement villages in the ACT are regulated by the Retirement Villages Act 2012 (ACT). The Act governs:

• what information a prospective resident must receive before signing a village contract;
• what must be included in the village contract;
• what cannot be included in the village contract;
• how much time prospective residents have to consider the village contract before signing it;
• the settling-in period;
• residents’ rights;
• what are common property and capital items in a retirement village;
• who is responsible for the cost of maintenance or the replacement of capital items;
• the rights and obligations of village residents;
• the rights and obligations of the operator;
• how residents provide input;
• how a village contract can be terminated; and
• how are disputes are resolved.

Financial considerations

Residents are usually required to pay:

• an initial entry fee when moving in;
• rent and/or recurring service charges during the stay and perhaps beyond; and
• a departure fee, deferred management fee, or exit fee upon departure.

The costs will depend upon the particular legal structure of the retirement village.

With each village there will also be a Management Agreement to be entered into between the village and the resident. This Agreement will set out things like service charges paid by the resident to live in the village.

Obtaining legal advice when entering a village

Legal documentation for retirement villages is often long and complicated. It also varies from village to village depending on the structure. It is important to obtain legal advice on the documents.

The documentation may also have financial implications that are not envisaged. For example,

there are different departure fee structures associated with each village and it is important that residents fully understand the financial consequences for leaving the village. Solicitors can also work with financial planners and accountants to ensure that retirement village living is affordable.

The ACT Law Society can recommend solicitors experienced in this area.