Calculating and comparing Retirement Village contracts made easier!

Dean Claughton

Assisted by Kristina Tato

As an increasing number of Australians move into retirement villages, or 'Over 55 Lifestyle Estates', it is important to take a close look into issues that can arise whilst researching retirement village contracts, as well as the complexities involved in this type of move.  This process has now been made a lot easier with NSW Fair Trading's introduction of an online calculator set to assist older Australians in deciding which retirement village home is right for you.  

Both the entitlement to reside in a retirement village and the obligations of a resident are expressed in a retirement village contract.  There are varying structures of retirement village contracts - some create a registered interest over the village land, while others an equitable interest in the village.  All retirement village contracts are regulated under the Retirement Villages Act (NSW) 1999 (as amended) (the 'Act').

Contracts relating to retirement villages are often set out as one of, or a combination of the arrangements below.  You can find further, more in-depth definitions of each of these types of contracts in Coleman Greig Lawyers' Plain English Guide to Retirement Village Living.  Alternatively, you can get in touch with Dean Claughton to discuss your personal circumstances and any assistance you may require.

Loan and Licence Arrangements:

This type of contract requires an ongoing contribution to be paid by the resident in the form of an interest free loan made to the village operator.  Often, a non-refundable deposit is payable and is deemed part of the loan.  Expressed in the contract is an entitlement for the resident to reside at the village, together with the termination provisions in connection with that residency entitlement.
The village operator must maintain the capital items in the premises that do not belong to the resident, and recurrent charges are usually payable on a fortnightly or monthly basis.

Leasehold arrangements:

If a village operator owns the residential premises in the village, it may require a resident to enter into a lease.  The lease is registered on the title of the village property.  Pursuant to the Act, the resident would be considered as a registered interest holder if the retirement village contract is 'in the form of a registered long-term lease that includes a provision that entitles the person to at least 50% of any capital gain'.
As a condition in the lease, the resident is usually liable to make payment of recurrent charges on a monthly or quarterly basis. The village operator must maintain the capital items in the premises that do not belong to the resident.

Strata and community schemes:

Usually, a resident would purchase the premises by entering into a contract for sale of land with the existing registered proprietor, which if the premises have never been lived in before may be the village operator, or otherwise an outgoing resident/executor.  For the purposes of the Act, the purchase price under the contract itself is not considered an 'ingoing contribution'.  However, an ingoing contribution may be defined in a service contract as the price payable under the contract.
The primary difference between a strata retirement village and a non-strata village is that in a strata retirement village, the owners' corporation is responsible for maintenance of common property (as opposed to the village operator).

Rental arrangements:

Typically, this type of arrangement involves a residential tenancy agreement where you would pay rent, as you would under a standard tenancy arrangement.
With this type of arrangement, there are no ingoing contributions and no departure fees.  However, you may be required to make payment of a bond or other costs associated with the tenancy.  If the agreement contains a term excluding the applicability of the retirement village laws, the agreement will be covered by the Residential Tenancies Act (NSW) 2010.

Company title schemes:

Company Title Schemes generally require a resident to purchase shares in the company and the company is the registered proprietor of the village property.  In accordance with the constitution of the company, the shares give a resident the right to occupy a specific premises allocated to the share numbers purchased by the resident.  A resident is usually required to seek approval to purchase the shares from the Company's Board of Directors and must comply with the constitution of the company.

The process of going through these types of retirement village contracts whilst trying to keep track of all the various costs can be both difficult and overwhelming, especially when trying to compare prices.  In a bid to crackdown on inequitable business practices such as gouging, a new tool has been introduced to combat businesses profiting from misleading advertisements and confusing contracts that can often contain hidden costs.

2016 saw the launch of NSW Fair Trading's new online calculator, which aims to assist individuals in calculating potential retirement village contract costs - and allows retirees to easily compare prices.  Recent amendments to the Retirement Village Regulation 2017 show support of this initiative, which now puts an obligation on the village operator to determine an average resident comparison figure, which helps potential residents compare prices between different villages.

The calculator has been tailored to handle both simple and complex situations, with consumers given the choice of a basic calculator which provides an estimation based on your location and budget, or a detailed calculator for those who have a village disclosure statement.  Each calculator provides the user with estimated entry, ingoing and exit fees.  The primary beneficial element of this initiative is the fact that it enables people to calculate the costs for themselves before they sign a contract.

Ultimately, the calculator's availability is a great win for people looking at moving into retirement villages, as it provides a safeguard from hidden or unexpected costs.  It also empowers residents by providing a better understanding of the costs that they may face before entering into a contract, making the process much more transparent.

If you need advice, or have any questions regarding retirement villages, please don't hesitate to reach out to: