Retirement Village Regulations
Buying into a retirement village can mark an exciting next chapter of your life. It shouldn’t be a stressful time. However, retirement village contracts are often very complex. The contract is prepared by the retirement village operator or their solicitors and it is important that you obtain independent legal advice as to the terms of the contract before you sign it and move in.
The usual structure of a retirement village contract is that you do not actually own the unit. The contract is commonly a long-term lease agreement, for instance, a 99 years lease and you make an initial lump sum contribution.
When you decide to permanently vacate the premises, certain amounts are deducted from the initial contribution. These amounts are usually referred to as a “departure fee” or “exit fee” or a “deferred management fee” or a combination of these. These fees are in addition to the recurrent service fees that you pay to obtain the benefit of the common services in the village. Those services might include the use of tennis or squash courts, a library or reading room, a billiards room or games room or an on-call nursing service together with administration and maintenance services. You also pay for legal costs, agency commission and fees and repairs to your unit when you vacate.
It is also important to clarify whether you obtain the benefit of any increase in the value of the unit (capital gain). If your unit increases in value, you should obtain the benefit of a share of the capital gain, usually 50%, as the holder of a 99 years lease.
It is important that you understand you are buying a lifestyle and not an investment and often what you (or your estate) get back from your initial contribution when you permanently vacate the unit is less than what you put in.
Please contact the team at Conditsis Lawyers to demystify the process of estate planning.