Plain English Guide to Retirement Village Living

As an increasing number of Australians move into a retirement village, or the popular “Over 55 Lifestyle Estates,” it is important to view the issues that can arise and the complexities that are often involved in this type of move.

This Plain English Guide is designed to help you decipher the contractual obligations of moving into a retirement village. Given the sometimes complex nature of these contracts it is always advisable to seek professional legal advice before entering into any agreements or signing anything.

Types of Retirement Village Contracts

An 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 contracts 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’).

A retirement village contract may be in the form of one or a combination of the following arrangements. Generally, those arrangements may include certain provisions that are set out below:

(a) Loan and licence arrangements

This type of contract requires an Ingoing Contribution to be paid by the resident in the form of an interest free loan. Often, by definition in the contract, 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. Alternatively, where the loan agreement is in combination with another type of retirement village contract, the loan agreement should refer to that other document (such as a Licence or Lease) confirming the entitlement to reside.

The village operator must maintain the capital items in the premises that do not belong to the resident.

Recurrent charges are payable on a fortnightly or monthly basis.

On termination of the agreement, the village operator must give the resident a monetary refund in accordance with the loan agreement and the Act. A departure fee may be deducted from this refund.

(b) 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’.

Depending on the terms of the lease, the resident may be entitled to the whole of (or a share in) the capital gain and/or be liable for the whole (or a share) of the capital loss upon the sale of the leasehold interest.

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.

Departure fees would apply upon permanent vacation of the premises together with any outstanding recurrent charges and sale costs (including but not limited to legal costs and/or agents commission) that are permissible under the Act.

Upon termination, the village operator may require a surrender of the lease as a condition of paying the balance monies payable to the resident in accordance with the lease and the Act.

(c) 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 (see below) as the price payable under the Contract.

Upon settlement of the Contract, the resident will become the registered proprietor of the Lot within the strata or community scheme for the premises.  As a registered proprietor, the resident will be deemed a member of the owners’ corporation or community association and liable to make payment of the relevant strata/community levies for the scheme.

The main difference of a strata retirement village to 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) and individual residents are responsible for the capital items they own in their unit.  Also, residents should be aware of their rights and obligations under the Strata Schemes Management Act 1996 or the Community Land Management Act (NSW) 1989 which operate alongside the Retirement Villages Act (NSW) 1999.

A service contract is usually required to be entered into between the resident and the village operator. The service contract may define what is the Ingoing Contribution, require the resident to pay departure fees and also express whether capital gain/loss is to be shared with the operator.

In addition, the village operator and the owners’ corporation or community association may already have an agreement which requires the village operator to assist the owners’ corporation or community association with the management and administration of the common property.

(d) Rental arrangements

Typically, this type of arrangement involves a residential tenancy agreement where you would pay rent in the same way 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.

(e) 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.

Similarly with strata and/or community based retirement villages, the purchase price payable for the shares itself is not considered as an Ingoing Contribution for the purposes of the Act. However, an Ingoing Contribution may be defined as being the price of the shares in a Service Contract (see below).

The company may require the resident to enter into a services contract in which departure fees may become payable and the resident may also be required to make payment of a bond to the company which is refundable upon the sale of the shares.

In summary

Retirement village contracts are often voluminous, however this is due to the onus on villages to satisfy certain disclosure requirements and regulatory provisions under the Act.

Before entering into a retirement village contract, a resident should seek independent legal advice to ensure they fully understand his/her rights, financial commitments and other obligations under the retirement village contract and the Act.

How Coleman Greig Can Help You

Over the years, the property team at Coleman Greig has provided many clients with advice regarding retirement village contracts.

We can assist you with:

  • Drafting contracts
  • Reviewing contracts
  • Providing plain English advice on the conditions and their implications
  • Negotiating terms and conditions
  • Managing the settlement process
  • Estate planning 

For more information on how we can help you with your retirement village contract, please contact our Retirement Living team.

Disclaimer: The information provided in the document is a general summary and is not intended to be nor should it be relied upon as a substitute for legal or other professional advice.


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