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The complicated world of retirement villages

It’s a “jungle” out there. As Ian Henschke, Chief Advocate, National Seniors Australia, says, read the fine print and seek advice.

Key points

  • Many buyers don’t read the fine print or seek advice before signing a retirement village contract.
  • Seniors complain of being “ripped off” by unfair and incomprehensible contracts and conditions.
  • We’re calling for urgent reforms including national consistency led by the federal government.

Whenever I talk to seniors, I’m asked about retirement villages.

As an organisation, National Seniors Australia is asked by state and territory governments to lodge submissions when the laws governing independent villages are being reviewed. Given the confusion and frustration we are finding, the best thing governments could do is to implement a standard contract in simple plain English.

On a recent trip to Canberra, a newly elected federal MP from Western Australia told us he gets regular delegations of adult children complaining about what they see as their parents being subjected to unconscionable exit fees and refurbishment costs.

So, I wasn’t surprised to read a recent newspaper advice column where the writer was describing how their relative had moved out of a retirement village.

They were complaining their relative had bought it for $1.2 million and the operator had deducted $460,000 in various fees, refurbishment costs and sales commission when they left. They were pretty upset. They wanted to downsize themselves and wondered if there was such a thing as a retirement village which offered a better deal.

The expert told them that it was “pretty normal” to pay a 30% exit fee after 10 years and then a further $100,000 in renovations. A lawyer friend told me his father had paid $360,000 for his retirement unit and when he left paid a total of $190,000 in exit fees and refurbishment costs leaving him with just $170,000 for his aged care and it wasn’t sufficient to cover the residential accommodation deposit.

That lawyer and I went on radio, and we heard tales of woe come in on the talkback line.

But then one caller said she was blissfully happy in her retirement village. She loved not having to do maintenance, or gardening and enjoyed all the things on offer like a gymnasium and a café/restaurant where she met up with friends from the village.

She said she knew exactly what she was getting into when she signed the contract and was happy to let the operator take the exit fees etc. when she had to go.

You need to know exactly what is in the contract you’re signing and look at the whole picture. What do you pay for in a retirement village and what do they offer as part of the package?

When you own your own home, you must pay for maintenance of the garden and the house itself. Over decades that might mean tens of thousands of dollars spent on painting and gardening.

There are some retirement villages called Land Lease communities that offer an option of no exit fee. But they usually don't offer the capital gain either.

These communities require you to be responsible, as the homeowner, for your own home maintenance and there are sometimes no buybacks, so you keep paying monthly fees until the home sells. Rules vary from state to state. In some jurisdictions, buyback is guaranteed.

So, you really must look closely at the contract. If you sell in a retirement village, will you keep paying fees and for how long?

National Seniors Australia policy

Urgent reform needed

The retirement village sector needs urgent reform and regulation to better protect older Australians against unfair and incomprehensible contracts, fees, and charges.

That is the strongly worded key recommendation of the National Seniors Australia submission to the Victorian Review of that state’s Retirement Villages Act.

More information about our submission on retirement villages can be found here.

We are calling for a standard, plain English contract. Many contracts are overly long, full of details and not reader-friendly. Some are individualised to the village and can be more than 50 pages long with complex legal text!

And what happens if the retirement village is on-sold? We say it should not be on-sold to a new corporate identity, company or individual without the owner providing at least five years’ notice.

There’s abundant evidence buyers do not read the fine print or seek family or legal advice before signing up to a retirement village.

My friend the lawyer’s father said he didn’t ask his son because he didn’t want to bother him, and it all seemed fine to him!

The cost of good legal advice may be thousands of dollars. Some solicitors do charge up to $5,000, and older people often decide against getting this advice because of the cost. But not doing so also could come at a very dear cost, more than the legal advice.

The retirement village marketers usually are accentuating the positives so a buyer doesn’t always get the full picture.

In 2020, noted that “despite having been the mainstay of Australia’s retirement village industry for decades, deferred management fees remain a poorly understood and confusing concept for many consumers”. 

To conclude, remember the time-worn Latin phrase, “caveat emptor”. Buyer beware.


Ian Henschke

Ian Henschke

Chief Advocate, National Seniors Australia

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