The decision to sell up and move into a retirement village is a big one. This life changing decision is made none the easier where buyers are given complex contracts, many types of different fees and capital gains tax structure that favour retirement village operators ahead of residents.
The Turneresque mists of documents, fees and charges might be dispelled in some measure with recent changes to the Retirement Villages regulations. The hope is that these changes will help clear the fog for retirees seeking to make the move to Retirement Villages.
The aim is for residents to have clearer information about their rights and obligations and more information about the villages in which they are investing.
From 1 October 2013 Village Operators must provide a “Financial Health Summary” of the Village and use a Standard Form Contract.
Financial Health Summary
Operators must provide residents with a mandatory disclosure statement 14 days prior to entering into a contract. This beefs up the existing requirements, by requiring disclosures about insolvency, any mortgages on title and how many premises within the retirement village were reoccupied following a vacancy during the past financial year. This Financial Health Summary must also form part of your village contract.
This is great news for prospective retirement village residents: the financial health and conditions of retirement villages will be more transparent from now on, helping retirees make informed decisions about their future residence.
Standard form contract
Retirement Village Contracts must now follow a Standard Form, which effectively incorporates parts of the Retirement Act into the village contract. Note that it is not all clear skies as the standard does not apply to contracts for sale under strata, community or company title, or to contracts relating to garages, car parks and storage areas.
Again, this change is likely to benefit prospective village residents by cementing their rights and the obligations of the village operators.
FOR VILLAGE OPERATORS
Make sure you understand your new obligations. Village operators face penalties of up to $8,500 per offence for failure to use a standard form contract for village contracts. Village operators are permitted to insert additional clauses to the standard form contract, but additional clauses cannot be inconsistent with the Retirement Villages Act or Regulations.
FOR RESIDENTS: KNOW YOUR RIGHTS
There are a multitude of rights of which prospective retirement village residents should be aware. For example:
- Permanent vacation – this is not a euphemism!
Permanent vacation is important to determine when certain fees stop, such as departure fees or recurrent charges for personal service (e.g. meals, cleaning and laundry). Forty-two days after permanent vacation, liability for recurrent charges ceases. In addition, if no new resident has moved in within six months, the operator may need to pay a refund.
- Capital gains sharing
A resident may be entitled to anywhere between nil and 100 per cent of any capital gain following permanent vacation. It is critical that you understand the deal and get tax advice about your retirement village contract before you sign up.
- Departure fee
A departure fee may apply. This can be the single largest cost on moving out.
- Reinstatement Costs
A resident must pay to rectify wear and tear on permanent vacation.
Don’t leave yourself open to shipwreck on the rocky shores of retirement village contracts: get good legal, financial, accounting and tax advice before embarking.
* Retirement Villages Amendment (Standard Contract) Regulation 2013, commenced 1 October 2013