The fundamental difference is that the rights created with retirement village contracts are not the same as ownership of land, 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 an owner.
These contracts have long-term financial consequences in that they normally involve substantial exit charges when the person leaves the retirement village. The industry says the trade-off is essentially this – the cost going in is lower, but the cost going out is much higher.
That way people can afford to go into a retirement home or village.
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.
The new retirement village contract regime began on February 1.
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 set out such things as the formalities of ownership and operator of the village; applicable age rules for occupants; type of tenure (lease, licence, ownership); disability accessibility and parking; plans for further construction or expansion on the site; facilities available, including any co-located aged care facility; services available for residents (included, or at additional cost); security and emergency assistance; estimated incoming and ongoing costs; if there is an exit fee and how it’s calculated; what happens with reinstatement and renovation costs; what happens with capital gains or losses on resale; how and when the exit entitlement is paid; financial management of the village; insurance responsibilities; whether there’s a trial/settling in period and rules for pets; the village’s accreditation status and whether there’s a waiting period.
Don MacPherson is an expert at BrisbaneElder Law. Call 1800 961 622 or visit brisbaneelderlaw.com.au