Retirement living exit fees slammed

Retirement living communities continue to generate news as residents push back against opaque and confusing fee structures, especially those imposed when they leave or die. 

A land lease community is different beast to a traditional retirement village. They are regulated under different legislation and rules, but use similar financial models, such as deferred management fees.

Lifestyle Communities sustained a significant setback to its business model, typical of many lifestyle and retirement villages, due to a surprise ruling from the Victorian Civil and Administrative Tribunal. 

The tribunal found that the “exit fees” – also known as Deferred Management Fees (DMFs) – charges its departing residents as a proportion of their home value did not comply with the law. 

The company was found to have failed to clearly state the amount of Deferred Management Fees in its residential site agreements. 

According to an Australian Financial Review report, the organisation’s 30-plus parks have always operated under a Deferred Management Fee model, where tenants pay less for a property up front and more when they leave (often on death).

“The pitch is that it makes the purchase price lower and spares a downsizer’s cash that can be spent on a new car/boat/living expenses/a holiday or whatever else an ageing Australian desires,” the report said. 

The Lifestyle Communities group has indicated that it will appeal the landmark tribunal decision that found its Deferred Management Fees were invalid under Victorian tenancy laws. 

Housing for the Aged Action Group (HAAG) welcomed the decision, claiming it meant the Victorian Residential Tenancies Act prevented a land lease village from charging Deferred Management Fees. 

DMFs are a common kind of exit fee charged across several types of retirement housing, often costing departing residents or their families tens of thousands of dollars or more. 

“We have long said that these DMFs are unfair and, in some cases, unlawful,” Shane McGrath, HAAG’s senior tenancy and retirement worker, said. 

“This decision confirms that some of the most common models for DMFs in land lease communities are prohibited under Victorian law.”

Land lease communities, also called residential parks or Part 4A parks, are a form of retirement housing where residents purchase demountable dwellings but lease the land on which they sit.  

HAAG says the Victorian Residential Tenancies Act provides that no fee or charge can be imposed under a site agreement unless the amount is disclosed. 

“An amount based on the sale price of a Part 4A dwelling cannot be properly disclosed and so cannot be charged,” Mr McGrath said. 

“These fees aren’t just technically unlawful, they’re deeply unfair and can have a huge impact on older Victorians. They can limit people’s access to aged care, reduce the amount they can leave to their families, and trap people in badly mismanaged and substandard accommodation,” he said. 

The Housing for the Aged Action Group’s new report found elder abuse occurs within close family relationships and shared living arrangements, reinforcing the importance of secure and stable housing as a critical pathway out of abuse. 

“ … older people are living with people who are doing them harm, often because they have no choice,” the report found. “Rising costs and limited availability of affordable housing leaves many people trapped in cycles of abuse.” 

On a positive note, housing was found to be a pathway for older people to escape abuse. 

The report calls for increased investment in more public and community housing so older people (and their adult children) have access to affordable and secure housing alternatives. 

The full report can be read here.