THE fundamental difference with retirement village contracts is that the rights created are not the same as land ownership, and the monies payable at the start and at the end, are very different from the normal buy/sell proposition.
In many respects, the rights are more akin to being a tenant for an indefinite period rather than being an owner.
These contracts have long-term financial consequences in that they normally involve substantial exit charges when the person leaves the village.
The industry says the trade-off is essentially this – the cost going in is lower, but the cost going out is much higher. People can afford to go into a retirement home with a reduced entry price, but they pay more on the way out.
The rights for purchasers vary across contracts and villages. Some are leases, some are licences; some allow for capital gain, but most do not.
The exit fee percentages vary, as does the timing of how they accumulate.
In essence, there are two parts to any retirement village contract – the Compulsory Information under the Retirement Village Act and the Residence Contract for the particular retirement village. Each village is required to complete the standard clauses in the compulsory section with their specific information.
The village comparison document requires the retirement village to set out essential information in a format that is consistent across the industry.
The prospective costs document gives details about the costs of entering; estimated ongoing costs of living; estimated costs if a purchaser leaves after one, two, five or 10 years; and the estimated exit payment.
The most important document the village will provide is its residence contract, which sets out its unique clauses, requirements, and obligations.
These contracts vary from village to village and often run to 50-plus pages.
This is where specialist advice is needed to assist in understanding what you are signing up to, as the rights and obligations taken on will last for years.
Under the Retirement Village Act there is a 14-day cooling off period.
A purchaser should seek independent legal advice. There are different types of contracts and they can be complex.
Don Macpherson is founder of Sunshine Coast Elder Law and Brisbane Elder Law experts in retirement village contracts. Call 1800 961 622 or visit sunshinecoastelderlaw.com.au or brisbaneelderlaw.com.au